SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1996 Commission File Number 1-11605
[LOGO OF THE WALT DISNEY COMPANY]
Incorporated in Delaware I.R.S. Employer500 South Buena Vista Street, Burbank, California 91521 Identification No.(818) 560-1000 95-4545390
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each ExchangeTitle of Each Class on Which Registered------------------- ---------------------Common Stock, $.01 par value New York Stock Exchange
Pacific Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months, and (2) has been subject to such filingrequirements for the past 90 days. Yes X No
---- ----Indicate by check mark if disclosure of delinquent filers pursuant to Rule
405 of Regulation S-K is not contained herein, and will not be contained, tothe best of registrant's knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. X
----As of November 30, 1996, the aggregate market value of registrant's common
stock held by non-affiliates (based on the closing price on such date asreported on the New York Stock Exchange-Composite Transactions) was $49.1billion. All executive officers and directors of registrant and all personsfiling a Schedule 13D with the Securities and Exchange Commission in respectto registrant's common stock have been deemed, solely for the purpose of theforegoing calculation, to be "affiliates" of the registrant.
There were 675,098,522 shares of common stock outstanding as of December 12,1996.
Certain information required for Part III of this report is incorporatedherein by reference to an amendment to this report on Form 10-K/A to be filedwithin 120 days after the end of the fiscal year covered by this report.
PART I
ITEM 1. BUSINESSThe Walt Disney Company, together with its subsidiaries, is a diversified
international entertainment company with operations in three businesssegments: Creative Content, Broadcasting and Theme Parks and Resorts.Information on revenues, operating income, identifiable assets andsupplemental revenue of the Company's business segments appears in Note 11 ofthe Notes to Consolidated Financial Statements included in Item 8 hereof. TheCompany employs approximately 100,000 people.
On February 9, 1996, the Company completed its acquisition of CapitalCities/ABC, Inc. ("ABC"). Information on the acquisition appears in Note 2 ofthe Notes to Consolidated Financial Statements included in Item 8 hereof. As aresult of the acquisition, a new parent company, with the name "The WaltDisney Company," replaced the old parent company of the same name. Forconvenience, the term "Company" is used in this report to refer to both theold and the new parent company. Unless the context otherwise requires, theterm is also used to refer collectively to the parent company and thesubsidiaries through which its various businesses are actually conducted.
BUSINESS SYNERGY
The Company's three different operating segments market the Company'strademarks, characters, products and services as part of a cohesive effort togenerate stockholder value through synergy.
The Creative Content segment produces live-action and animated motionpictures, television programs and musical recordings, licenses the Company'scharacters and other intellectual property for use in connection withmerchandise and publications, and publishes books and magazines. Within thesegment, films and characters are often promoted through the release ofaudiocassettes and compact discs, children's books and magazines. In addition,television programs have been created that contain characters originated inanimated films. Character merchandising and publications licensing promote theCompany's films and television programs, as well as the Company's otheroperations. The Company also operates the Disney Stores, which are directretail distribution outlets for products based on the Company's characters andfilms. The Company is also engaged directly in the home video and televisiondistribution of its film and television library.
The Company's other operations benefit substantially from the CreativeContent segment, and those operations in turn promote the Company's films,television programs and merchandise. The products and services of the CreativeContent segment often contain elements highlighting the Company's theme parksand resorts, and the theme parks and resorts will often promote recent
releases of motion pictures through parades, stage shows and otherattractions.
In keeping with its pursuit of business synergy, the Company recently movedinto the development of multimedia technologies, including interactivesoftware, interactive television and video ventures. The Company's interactivesoftware is primarily oriented toward children, and includes characters fromthe Company's animated films and television programs. The Company is alsoexpanding into the cruise line business, with two ships scheduled to belaunched in 1998. The Company anticipates promoting the cruise line businessby incorporating the Company's characters, themes from live-action andanimated motion pictures, film and stage entertainment into the cruiseexperience, and by packaging cruises with visits to the Walt Disney WorldResort.
In addition to the value generated through synergy, the Company believes itsoperating segments benefit substantially from the Company's reputation in theentertainment industry for commitment to excellent quality in all of itsproducts and services.
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CREATIVE CONTENT
The Company is an industry leader in producing and acquiring live-action andanimated motion pictures for distribution to the theatrical, television andhome video markets, and producing original television programming for thenetwork and first-run syndication markets. In addition, the Company alsoproduces music recordings and live stage plays. The Company licenses the name"Walt Disney," as well as the Company's characters, visual and literaryproperties and songs and music, to various consumer manufacturers, retailers,show promoters and publishers throughout the world. Company subsidiaries alsoengage in direct retail distribution through The Disney Stores; publishdomestic newspapers, technical and specialty publications; create books,magazines and comics in the United States and Europe; and produce popularmusic, children's audio products and computer software for all markets, aswell as film and video products for the educational marketplace.
THEATRICAL FILMSWalt Disney Pictures and Television, a subsidiary of the Company, produces
and acquires live-action motion pictures that are distributed under thebanners Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures andCaravan Pictures. Another subsidiary, Miramax Film Corp., acquires andproduces motion pictures that are primarily distributed under the Miramaxbanner. The Company also produces and distributes animated motion picturesunder the banner Walt Disney Pictures. In addition, the Company distributesfilms produced or acquired by certain independent production companies.
Recently, the Company announced a new direction for its film slate, whichwill be phased-in over the next several years. The Company intends onproducing fewer total films, but increasing its per film expenditures.Accordingly, total film expenditures are expected to approximate current
levels. During 1997, the Company will seek to distribute approximately 25feature films under the Company's various banners and approximately 35additional films under the Miramax banner, including several live-actionfamily feature films, one to two full-length animated films and between 45 and55 films targeted to teenagers and adults. In addition, the Companyperiodically reissues previously released animated films. As of September 30,1996, the Company had released 427 full-length live-action features (primarilycolor), 34 full-length animated color features and approximately 554 cartoonshorts.
The Company distributes and markets its filmed products principally throughits own distribution and marketing companies in the United States and majorforeign markets.
HOME VIDEOThe Company directly distributes home video releases from each of its
banners in the domestic market. In the international market, the Companydistributes both directly and through foreign distribution companies. Inaddition, the Company acquires and produces original programming for direct-to-video release. As of September 30, 1996, approximately 834 produced andacquired titles, including 437 feature films and 397 cartoon shorts andanimated features, were available to the domestic marketplace. Approximately881 produced and acquired titles, including 462 feature films and 419 cartoonshorts and animated features, were available to the international homeentertainment market.
TELEVISION PRODUCTION AND DISTRIBUTIONThe Company develops, produces and distributes television programming for
broadcasters, cable and satellite operators, including the major televisionnetworks, The Disney Channel, A&E Television Networks and Lifetime Televisionunder the Buena Vista Television, Touchstone Television and Walt DisneyTelevision labels. Program development is carried out in collaboration with anumber of independent writers, producers and creative teams under variousdevelopment arrangements. The Company focuses on the development, productionand distribution of half-hour comedies for network prime-time broadcast,including such series as Home Improvement, Ellen and Boy Meets World. Fall1996 releases included Dangerous Minds, Life's Work and Homeboys in OuterSpace.
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Walt Disney Television currently distributes two animated cartoon series forSaturday morning: Aladdin and Timon and Pumbaa. The Company also offers avariety of prime-time specials for exhibition on network television.Additionally, the Company produces first-run animated and live-actionsyndicated programming. The Disney Afternoon is a two-hour block of cartoonsairing five days per week, including Aladdin, Gargoyles, Darkwing Duck, MightyDucks, Quack Pack and Timon and Pumbaa. Live-action programming includes Live!with Regis and Kathie Lee, a daily talk show on ABC; Siskel & Ebert, a weeklymotion picture review program; Disney Presents Bill Nye the Science Guy andSing Me a Story With Belle, weekly educational programs for children.
The Company licenses the theatrical and television film library to the
domestic television syndication market. Television programs in off-networksyndication include Home Improvement, Blossom, Dinosaurs, The Golden Girls andEmpty Nest. Major packages of the Company's feature films and televisionprogramming have been licensed for broadcast continuing over several years.
The Company licenses television series developed for United States networksin a number of foreign markets, including Canada, France, Germany, Italy,Spain and the United Kingdom. Certain of the Company's television programs arealso syndicated by the Company abroad, including The Disney Club, a weeklyseries that the Company produces for foreign markets. The Company's televisionprograms are telecast regularly in many countries, including Australia,Brazil, Canada, China, France, Germany, Italy, Japan, Mexico, Spain and theUnited Kingdom.
The Company currently licenses its feature films for pay television on anoutput basis in several geographic markets, including the United Kingdom andScandinavia, and has an arrangement with Showtime through 1997 for the UnitedStates. In 1993, the Company entered into an agreement to license to theEncore pay television service, over a multi-year period, exclusive domesticpay television rights to Miramax films beginning in 1994 and TouchstonePictures and Hollywood Pictures films starting in 1997.
AUDIO PRODUCTS AND MUSIC PUBLISHINGThe Company also produces and distributes compact discs, audiocassettes and
records, consisting primarily of soundtracks for animated films and read-alongproducts, directed at the children's market in the United States, France andthe United Kingdom, and licenses the creation of similar products throughoutthe rest of the world. In addition, the Company commissions new music for itsmotion pictures, television programs and records and exploits the songcopyrights created for the Company by licensing others to produce anddistribute printed music, records, audiovisual devices and publicperformances.
Domestic retail sales of compact discs, audiocassettes and records are thelargest source of revenues, while direct marketing, which utilizes catalogs,coupon packages and television, is a secondary means of distribution for theCompany.
The Company's Hollywood Records subsidiary develops, produces and marketsrecordings from new talent across the spectrum of popular music, as well assoundtracks from certain of the Company's live-action motion pictures.
WALT DISNEY THEATRICAL PRODUCTIONSIn 1994, the Company produced a Broadway-style stage musical based on the
animated feature film Beauty and the Beast. The stage adaptation is currentlyplaying in several cities in the United States and around the world. TheCompany has also leased the New Amsterdam Theater in New York, and anticipatesproducing additional live theatre including The Lion King, scheduled to openin November 1997.
CHARACTER MERCHANDISE AND PUBLICATIONS LICENSINGThe Company's worldwide licensing activities generate royalties which are
usually based on a fixed percentage of the wholesale or retail selling priceof the licensee's products. The Company
licenses characters based upon both traditional and newly created filmproperties. Character merchandise categories which have been licensed includeapparel, watches, toys, gifts, housewares, stationery, sporting goods anddomestic items such as sheets and towels. Publication categories which havebeen licensed include continuity-series books, book sets, art and picturebooks and magazines.
In addition to receiving licensing fees, the Company is actively involved inthe development and approval of licensed merchandise and in theconceptualization, development, writing and illustration of licensedpublications. The Company continually seeks to create new characters to beused in licensed products.
THE DISNEY STORESThe Company markets Disney-related products directly through its retail
facilities operated under "The Disney Store" name. These facilities aregenerally located in leading shopping malls and similar retail complexes. Thestores carry a wide variety of Disney merchandise and promote other businessesof the Company. During fiscal 1996, the Company opened 65 new stores in theUnited States and Canada, 19 in Europe and 17 in the Asia-Pacific area,bringing the total number to 530 as of September 30, 1996. The Company expectsto open additional stores in the future in selected markets throughout theUnited States, as well as in Asia-Pacific, European and Latin Americancountries.
NEWSPAPER, TECHNICAL AND SPECIALTY PUBLISHINGPublishing operations include production of seven daily newspapers (five of
which have Sunday editions); weekly community newspapers; shopping guides andreal estate magazines; specialized publications that involve news and ideasfor various industries; and consumer, special interest, trade and agriculturalpublications. The publishing group also provides research and databaseservices.
BOOKS AND MAGAZINESThe Company also has book imprints in the United States offering books for
children and adults. The Company also produces several magazines for thechildren and family markets as well as Discover, a general science magazine.In addition, the Company is a partner in a joint venture which produceschildren's books and magazines and computer software magazines in France.
DISNEY INTERACTIVEDisney Interactive is a fully-integrated software business focused on the
product development and marketing of entertainment and educational computersoftware and video game titles for home and school. The division's initiativesalso involve the development, publication and distribution of content fornarrow-band on-line services, the interactive software market, interactivetelevision platforms, Internet web sites and other emerging technologyventures.
The Company produces audiovisual materials for the educational market,including videocassettes and film strips. It also licenses the manufacture andsale of posters and other teaching aids. The Company markets and distributes,through various channels, animation cel art and other animation-relatedartwork and collectibles.
COMPETITIVE POSITIONThe success of the Creative Content operations is heavily dependent upon
public taste, which is unpredictable and subject to change. In addition,filmed entertainment operating results fluctuate due to the timing oftheatrical and home video releases. Release dates are determined by severalfactors, including timing of vacation and holiday periods and competition inthe market. Operating results for the licensing and retail distributionbusiness are influenced by seasonal consumer purchasing behavior and by thetiming of animated theatrical releases.
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The Company's Creative Content businesses compete with all forms ofentertainment. A significant number of companies produce and/or distributetheatrical and television films, exploit products in the home video market,provide pay television programming service, sponsor live theater, and/orproduce interactive software. The Company also competes to obtain creativetalents, story properties, advertiser support, broadcast rights and marketshare, which are essential to the success of all of the Company's CreativeContent businesses.
The Company competes in its character merchandising and other licensing,publishing and retail activities with other licensers, publishers andretailers of character, brand and celebrity names. Although public informationis limited, the Company believes it is the largest worldwide licenser ofcharacter-based merchandise and producer/distributor of children's audioproducts.
The Company's newspaper publishing operations compete in their various localmarkets against other newspapers, and other media channels for audience andadvertising revenues. Technical and specialty publications usually cover smallmarkets, with limited competition.
BROADCASTING
TELEVISION AND RADIO NETWORKSThe Company operates the ABC Television Network, which as of September 30,
1996 had 223 primary affiliated stations operating under long-term agreementsreaching 99.9% of all U.S. television households. The ABC Television Networkbroadcasts programs in "dayparts" and types as follows: Monday through FridayEarly Morning, Daytime and Late Night, Monday through Sunday Prime Time andNews, Children's and Sports. The Company also operates the ABC Radio Networks,which serve more than 122 million people weekly over approximately 2,900affiliates as of September 30, 1996 through seven different program services,each with its own group of affiliated stations. The ABC Radio Networks alsoproduce and distribute a number of radio program series for radio stations
Generally, the networks pay the cost of producing their own programs oracquiring broadcast rights from other producers for network programming andpay varying amounts of compensation to affiliated stations for broadcastingthe programs and commercial announcements included therein. Substantially allrevenues from network operations are derived from the sale to advertisers oftime in network programs for commercial announcements. The ability to selltime for commercial announcements and the rates received are dependent on manyfactors, primarily the quantitative and qualitative audience that the networkcan deliver to the advertiser, as well as overall advertiser demand for timein the network marketplace.
TELEVISION AND RADIO STATIONSThe Company owns nine very high frequency (VHF) television stations, five of
which are located in the top ten markets in the United States; one ultra highfrequency (UHF) television station; eleven standard (AM) radio stations; andten frequency modulation (FM) radio stations. All of the television stationsare affiliated with the ABC Television Network, and 17 of the 21 radiostations are affiliated with the ABC Radio Networks. The Company's televisionstations penetrate 24% of the nation's television households, calculated usingthe multiple ownership rules of the Federal Communications Commission (FCC).The Company's radio stations reach more than 13 million people weekly in thetop twenty United States advertising markets.
During 1996, the Company also operated KCAL-TV, an independent station inLos Angeles, California. In May 1996, the Company entered into an agreement tosell KCAL to Young Broadcasting, Inc. The sale was consummated on November 22,1996.
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CABLE AND INTERNATIONAL BROADCASTThe Company's Cable and International Broadcast operations are principally
involved in the production and distribution of cable television programming,the licensing of programming to domestic and international markets andinvestment in joint ventures in foreign-based television operations andtelevision production and distribution entities. The Company owns The DisneyChannel, 80% of ESPN Inc., 37.5% of the A&E Television Networks, 50% ofLifetime Entertainment Services, and has various other investments in Europe.
The Disney Channel, which has approximately 25 million domestic and 7million international subscribers, is a cable television service. New showsdeveloped for original use by The Disney Channel include dramatic, adventure,comedy and educational series, as well as documentaries and first-runtelevision movies. In addition, entertainment specials include showsoriginating from both the Walt Disney World Resort(R) and Disneyland Park(R).The balance of the programming consists of products acquired from thirdparties and products from the Company's theatrical film and televisionprogramming library. The Disney Channel Taiwan premiered in March 1995,followed by the launch of The Disney Channel U.K. in October 1995. The Companybegan broadcasting The Disney Channel Australia in 1996, expects to launch TheDisney Channel in France and the Middle East in 1997, and is exploring the
development of The Disney Channel in other countries around the world.
ESPN Inc. operates ESPN, a cable sports programming service reaching 70million subscribers domestically and 105 million subscribers in 160 countriesinternationally, and ESPN2, which reaches 38 million domestic subscribers.ESPN also owns 33% of Eurosport, a pan-European satellite-delivered cable anddirect-to-home sports programming service, and 20% of Japan Sports Network, asports cable channel. ESPNews, a 24-hour sports news cable channel, waslaunched in fall 1996, and ESPN Asia and Star Sports have formed a jointventure for delivery of sports programming throughout most of Asia.
The A&E Television Network is a cable programming service devoted tocultural and entertainment programming reaching 68 million subscribers. TheHistory Channel, which is owned by A&E, reaches 22 million subscribers.
Lifetime Entertainment Services owns Lifetime Television, which reaches 66million cable subscribers and is devoted to women's lifestyle programming.
The Company has affiliated European operations including (i) Tele-MunchenFernseh GmbH & Co., a 50%-owned television and theatricalproduction/distribution company based in Munich, Germany, which also hasinterests in cinemas, (ii) RTL 2 Fernseh GmbH & Co., a 23%-owned generalentertainment commercial broadcasting company, also based in Munich, reaching28 million households, (iii) TM3 Fernseh GmbH & Co. KG, a 37.5%-owned women-oriented commercial broadcasting company reaching 17 million households, alsobased in Munich, (iv) RTL Disney Fernseh GmbH & Co. KG ("Super RTL"), a 50%-owned German family entertainment commercial broadcasting company reaching 18million households and (v) Scandinavian Broadcasting System SA, a 23%-ownedcompany based in Luxembourg with interests in television and radio stations,satellite-delivered cable and direct-to-home programming services andtelevision production, serving various European countries and reaching 13million households.
The Company's share of the financial results of the cable and internationalbroadcast services, other than The Disney Channel and ESPN Inc., are reportedunder the heading "Corporate Activities and Other" in the Company'sconsolidated statements of income.
COMPETITIVE POSITIONThe ABC Television Network, The Disney Channel, ESPN and other broadcasting
affiliates compete for viewers with the other television networks, independenttelevision stations, other video media such as cable television, multipointdistribution services ("MDS," which employ non-broadcast frequencies totransmit subscription television services to individual homes and businesses),direct
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broadcast services, satellite television program services and videocassettes.In the sale of advertising time, the broadcasting operations compete withother television networks, independent television stations, suppliers of cabletelevision programs and other advertising media such as newspapers, magazinesand billboards. Substantial competition also exists for exclusive broadcasting
rights for television programs. The ABC Radio Networks likewise compete withother radio networks and radio programming services, independent radiostations and other advertising media.
The Company's television and radio stations are in competition with othertelevision and radio stations, cable television systems, MDS, direct broadcastservices, satellite television program services, videocassettes and otheradvertising media such as newspapers, magazines and billboards. Suchcompetition occurs primarily in individual market areas. Generally, atelevision station in one market does not compete directly with other stationsin other market areas. Nor does a group of stations, such as those owned bythe Company, compete with any other group of stations as such. While thepattern of competition in the radio station industry is basically the same, itis not uncommon for radio stations outside of a market area to place a signalof sufficient strength within that area (particularly during nighttime hours)to gain a share of the audience. However, they generally do not realizesignificantly increased advertising revenues as a result.
The Company's television and radio broadcasting operations are under thejurisdiction of the FCC. Under the Communications Act of 1934, as amended (the"Communications Act"), the FCC is empowered to issue, revoke or modifybroadcasting licenses, determine the location of stations, regulate theequipment used by stations, adopt regulations to carry out the provisions ofthe Communications Act and impose certain penalties for violation of itsregulations.
FCC regulations also restrict the ownership of stations and cable operationsin certain circumstances, and regulate the practices of network broadcasters,cable providers and competing services. Such laws and regulations are subjectto change, and the Company generally cannot predict whether new legislation orregulations, or a change in the extent of application or enforcement ofcurrent laws and regulations, would have an adverse impact on the Company'soperations.
THEME PARKS AND RESORTS
The Company operates the Walt Disney World Resort in Florida and theDisneyland Park and two hotels in California. The Company also earns royaltieson revenues generated by the Tokyo Disneyland(R) theme park and has an equityinterest in Disneyland Paris.
WALT DISNEY WORLD RESORTThe Walt Disney World Resort is located on approximately 30,500 acres of
land owned by Company subsidiaries 15 miles southwest of Orlando, Florida. Theresort includes three theme parks (the Magic Kingdom, Epcot and the Disney-MGMStudios), hotels and villas, an entertainment complex, a shopping village,conference centers, campgrounds, golf courses, water parks and otherrecreational facilities designed to attract visitors for an extended stay. Afourth theme park, Disney's Animal Kingdom featuring live animals in naturalhabitats, is currently under construction and scheduled to open in spring1998.
The Company markets the entire Walt Disney World Resort through a variety ofnational, international and local advertising and promotional activities. The
Walt Disney World Resort began celebrating its 25th Anniversary in October1996 with a series of promotional and special events. A number of attractionsin each of the theme parks are sponsored by corporate participants throughlong-term participation agreements.
MAGIC KINGDOM - The Magic Kingdom, which opened in 1971, consists of sevenprincipal areas: Main Street U.S.A., Liberty Square, Frontierland, NewTomorrowland, Fantasyland, Adventureland and Toontown Fair. These areasfeature themed rides and attractions, restaurants, refreshment stands andmerchandise shops.
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EPCOT - Epcot, which opened in 1982, consists of two major themed areas:Future World and World Showcase. Future World dramatizes certain historicaldevelopments and addresses the challenges facing the world today through majorpavilions devoted to high-tech products of the future ("Innoventions"),communication and technological exhibitions ("Spaceship Earth"), and energy,transportation, imagination, life and health, the land and seas. WorldShowcase presents a community of nations focusing on the culture, traditionsand accomplishments of people around the world. World Showcase includes as acentral showpiece the American Adventure pavilion, which highlights thehistory of the American people. Other nations represented are Canada, China,France, Germany, Italy, Japan, Mexico, Morocco, Norway and the United Kingdom.Both areas feature themed rides and attractions, restaurants and merchandiseshops.
DISNEY-MGM STUDIOS - The Disney-MGM Studios, which opened in 1989, consistsof a theme park, an animation studio and a film and television productionfacility. The complex park centers around Hollywood as it was during the1930's and 1940's and features Disney animators at work and a backstage tourof the film and television production facilities in addition to themed foodservice and merchandise facilities and other attractions. The productionfacility consists of three sound stages, merchandise shops and a back lot areaand currently hosts both feature film and television productions.
RESORT FACILITIES - As of September 30, 1996, the Company owned and operated12 resort hotels and a complex of villas and suites at the Walt Disney WorldResort, with a total of approximately 14,700 rooms. The Disney Institute, aresort offering participatory programs and life-enriching experiences, openedin 1996, as did Disney's BoardWalk Hotel with 378 luxury rooms. In addition,Disney's Fort Wilderness camping and recreational area offers approximately1,200 campsites and wilderness homes. Several of the resort hotels alsocontain conference centers and related facilities.
Recreational activities available at the resort facilities include fivechampionship golf courses, miniature golf courses, an animal sanctuary,tennis, sailing, water skiing, swimming, horseback riding and a number ofnoncompetitive sports and leisure time activities. The Company also operatesthree water parks: Blizzard Beach, River Country and Typhoon Lagoon.
The Company has also developed a shopping facility and entertainment complexto be known as Downtown Disney, which consists of the Disney Village
Marketplace and Pleasure Island. The Disney Village Marketplace is home to the50,000-square-foot World of Disney, which opened in October 1996 and is thelargest Disney retail store in the world. Pleasure Island, an entertainmentcenter adjacent to the Disney Village Marketplace, includes restaurants, nightclubs and shopping facilities. These shopping and entertainment facilities arecurrently under significant expansion. The newly expanded property will besituated on 66 acres on the west side of Pleasure Island and will includemultiple third party arrangements such as the House of Blues, a New Orleans-style restaurant and live entertainment facility; Wolfgang Puck's Cafe, aCalifornia cuisine restaurant; Virgin Records Megastore, a state-of-the-artmusic, video and book showplace; Cirque du Soleil, a high energy acrobaticsand modern dance show; Bongos Cuban Cafe, a cafe/night club; and an AMCtheater complex, which will become the largest theater complex in Florida.
Currently under development are Celebration, a 4,900-acre town; DisneyCruise Line, a cruise vacation line that will include two 85,000 ton ships;Disney's Coronado Springs Resort, a facility designed to serve the moderatelypriced hotel/convention market; and Disney's Wide World of Sports, a sportscomplex featuring professional and amateur sporting events.
At the Disney Village Marketplace Hotel Plaza, seven independently operatedhotels are situated on property leased from the Company. These hotels have acapacity of approximately 3,700 rooms. Additionally, two hotels--the WaltDisney World Swan and the Walt Disney World Dolphin, with an aggregatecapacity of approximately 2,300 rooms--are independently operated on propertyleased from the Company near Epcot. Another hotel, the 288-room Shades ofGreen on Walt Disney World Resort, is leased from the Company and operated bya non-profit organization as an armed forces recreation center.
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DISNEYLANDThe Company owns 330 acres and has under long-term lease an additional 39
acres of land in Anaheim, California. Disneyland, which opened in 1955,consists of eight principal areas: Toontown, Fantasyland, Adventureland,Frontierland, Tomorrowland, New Orleans Square, Main Street and CritterCountry. These areas feature themed rides and attractions, restaurants,refreshment stands and merchandise shops. A number of the Disneylandattractions are sponsored by corporate participants. The Company marketsDisneyland through national and local advertising and promotional activities.The Company also owns and operates the 1,100-room Disneyland Hotel and the500-room Disneyland Pacific Hotel.
The Company has received approval from the city of Anaheim to construct anew theme park, Disney's California Adventure. The new theme park will beconstructed on the existing Disneyland parking lot and property adjacent tothe park. Disney's California Adventure will celebrate the many attributes ofthe state of California and will feature Disneyland Center, a themed complexof shopping, dining, and entertainment venues; the Grand Californian, a deluxe750-room hotel located inside the park; and an assortment of "California"themed areas with associated rides and attractions.
In 1995, the Company completed the 497-unit Disney Old Key West Resort atthe Walt Disney World Resort. In addition, 175 units in Vero Beach, Floridaopened in October 1995, and 102 units on Hilton Head Island, South Carolina,and 383 villas located at Disney's BoardWalk Resort opened in 1996. Availableunits at each facility are intended to be sold under a vacation ownership planand operated partially as rental property until the units are sold.
DISNEY REGIONAL ENTERTAINMENTThe Company is developing a variety of entertainment-based initiatives to
open in various parts of the United States and abroad. These businesses willinclude sports concepts, interactive entertainment centers, children's playcenters and other operations that use Disney's creative entertainment talentsand the popularity of the Disney brand.
Beginning in February 1997, the Company will be opening Club Disney, thefirst regional entertainment operation, in select suburban markets. ClubDisney is a play environment oriented toward children under 10 and theirparents. The first store in Thousand Oaks, California, will include a three-story Jungle Climber, a game area, the Pooh N You Hundred Acre Wood-themedplay area, Curiosity Castle, the Starring You Studio and other attractions.Entrance to the property will be priced comparably with the cost of admissionto a movie theater. The property will also have a cafe, a unique retail storeand party rooms with different themes for birthdays and other specialoccasions.
TOKYO DISNEYLANDThe Company earns royalties on revenues generated by the Tokyo Disneyland
theme park, which is owned and operated by Oriental Land Co., Ltd. (OLC), anunrelated Japanese corporation. The park, which opened in 1983, is similar insize and concept to Disneyland and is located approximately six miles fromdowntown Tokyo, Japan.
The Company and OLC have concluded a joint study of the basic design conceptfor a theme park and associated hotel adjacent to Tokyo Disneyland. Theschematic design and design development stages for Tokyo DisneySea areexpected to continue until late 1997, at which time OLC will make a finaldecision whether to commence construction.
In addition, the Company and OLC have reached agreement on the constructionof a 500 room Disney-branded hotel to be built near Tokyo Disneyland.
DISNEYLAND PARISDisneyland Paris is located on a 4,800-acre site at Marne-la-Valle,
approximately 20 miles east of Paris, France. The theme park, which opened inApril 1992, features 42 attractions in its five themed
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lands. Seven themed hotels, with a total of approximately 5,800 rooms, are partof the resort complex, together with an entertainment center offering a varietyof retail, dining and show facilities. The project has been developed pursuantto a 1987 master agreement with French governmental authorities by Euro DisneyS.C.A., a publicly held French company in which the Company holds a 39% equity
interest and which is managed by a subsidiary of the Company. The financialresults of the Company's investment in Euro Disney are reported under theheading "Corporate Activities and Other" in the Company's consolidatedstatements of income.
WALT DISNEY IMAGINEERINGWalt Disney Imagineering provides master planning, real estate development,
attraction and show design, engineering support, production support, projectmanagement and other development services for the Company's operations.
ANAHEIM SPORTS, INC.The Company owns and operates a National Hockey League franchise, the Mighty
Ducks of Anaheim. In addition, a subsidiary of the Company serves as generalpartner of the Anaheim Angels (formerly the California Angels), a Major LeagueBaseball team.
COMPETITIVE POSITIONAll of the theme parks and most of the associated resort facilities are
operated on a year-round basis. Historically, the theme parks and resortsbusiness experiences fluctuations in park attendance and resort occupancyresulting from the nature of vacation travel. Peak attendance and resortoccupancy generally occur during the summer months when school vacations occurand during early-winter and spring holiday periods.
The Company's theme parks and resorts compete with all other forms ofentertainment, lodging, tourism and recreational activities. The profitabilityof the leisure-time industry is influenced by various factors which are notdirectly controllable, such as economic conditions, amount of available leisuretime, oil and transportation prices and weather patterns.
ITEM 2. PROPERTIES
The Walt Disney World Resort, Disneyland Park and other properties of theCompany and its subsidiaries are described in Item 1 under the caption ThemeParks and Resorts. Film library properties are described in Item 1 under thecaption Creative Content.
A subsidiary of the Company owns approximately 51 acres of land in Burbank,California on which the Company's studios and executive offices are located.The studio facilities are used for the production of both live-action andanimated motion pictures and television products. In addition, Companysubsidiaries lease office and warehouse space for certain studio and corporateactivities.
The Company's Broadcasting segment corporate offices are located in aCompany-owned building at 77 West 66th Street in New York City. The Companyalso owns the ABC Television Center adjacent to the building and ABC RadioNetworks' studios at 125 West End Avenue in New York City.
Subsidiaries of the Company own the ABC Television Center and lease the ABCTelevision Network offices in Los Angeles, the ABC News Bureau facility inWashington, DC and a computer facility in Hackensack, New Jersey, under leasesexpiring on various dates through 2034. The Company's broadcast operations andengineering facility and local television studios and offices in New York City
are leased, but the Company has the right to acquire such properties for anominal sum in 1997. The Company's 80%-owned subsidiary ESPN owns ESPN Plaza inBristol, Connecticut, from which it conducts its technical operations. TheCompany owns the majority of its other broadcast studios and offices andbroadcast transmitter sites elsewhere, and those which it does not own areoccupied under leases expiring on various dates through 2039.
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A U.K. subsidiary of the Company owns buildings on a four-acre parcel underlong-term lease in London, England. The mixed-use development consists of143,000 square feet of office space occupied by subsidiary operations, a27,000 square foot building leased to a third party and 65,000 square feet ofretail space.
Various Company subsidiaries own and lease executive, editorial and otheroffices and facilities used by the publishing operation in various cities. Forleased properties, the leases expire on various dates through 2006. All of thesignificant premises occupied by the newspapers are owned by Companysubsidiaries.
The Company's Disney Store unit also leases retail space for the DisneyStores in shopping malls and similar retail complexes worldwide.
It is the Company's practice to obtain United States and foreign legalprotection for its theatrical and television product and its other originalworks, including the various names and designs of the animated characters andthe publications and music which have been created in connection with theCompany's filmed products. The Company owns all rights to the name, likenessand portrait of Walt Disney.
ITEM 3. LEGAL PROCEEDINGS
The Company, together with, in some instances, certain of its directors andofficers, is a defendant or co-defendant in various legal actions involvingcopyright, breach of contract and various other claims incident to the conductof its businesses. Management does not expect the Company to suffer anymaterial liability by reason of such actions.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders during the fourthquarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE COMPANYThe executive officers of the Company are elected each year at the
organizational meeting of the Board of Directors which follows the annualmeeting of the stockholders and at other meetings as appropriate. Each of theexecutive officers has been employed by the Company in the position or
positions indicated in the list and pertinent notes below. Messrs. Eisner,Disney and Murphy have been employed by the Company as executive officers formore than five years.
At September 30, 1996, the executive officers were as follows:
<TABLE><CAPTION>
ExecutiveOfficer
Name Age Title Since--------------------- --- -------------------------------- ---------<C> <C> <S> <C>Michael D. Eisner 54 Chairman of the Board and Chief 1984
Executive OfficerMichael S. Ovitz 49 President /1/ 1995Roy E. Disney 66 Vice Chairman of the Board 1984Sanford M. Litvack 60 Senior Executive Vice President 1991
and Chief of CorporateOperations
Richard D. Nanula 36 Senior Executive Vice President 1996and Chief Financial Officer /2/
John F. Cooke 54 Executive Vice President- 1995Corporate Affairs /3/
Lawrence P. Murphy 44 Executive Vice President and 1985Chief Strategic Officer andChairman of Disney Cruise Lines
</TABLE>--------/1/ On October 2, 1995, Mr. Michael Ovitz joined the Company and assumed the
position of President. Mr. Ovitz co-founded and served as chairman ofCreative Artists Agency from 1975 until 1995. On December 12, 1996, theCompany announced that Mr. Ovitz will leave the Company effective January31, 1997.
/2/ Mr. Nanula joined the Company's strategic planning operation in 1986 and wasnamed Vice President-Treasurer of the Company in January 1990. He was namedSenior Vice President and Chief Financial Officer in August 1991, ExecutiveVice President in February 1994 and President of The Disney Stores, Inc. inNovember 1994, where he served until assuming his present position inFebruary 1996.
/3/ Mr. Cooke served as President of the The Disney Channel from 1985 untilassuming his present position in February 1995.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York and Pacific stockexchanges (NYSE symbol DIS). The following sets forth the high and low
The Company declared a first quarter dividend of $.09 per share and threesubsequent quarterly dividends of $.11 per share in 1996, and in 1995,declared a first quarter dividend of $.075 per share and three subsequentquarterly dividends of $.09 per share.
As of September 30, 1996, the approximate number of record holders of theCompany's common stock was 564,000.
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ITEM 6. SELECTED FINANCIAL DATA
(In millions, except per share data)<TABLE><CAPTION>
</TABLE>--------(1) These amounts reflect the impact of the acquisition of ABC. See Note 2 to
the Consolidated Financial Statements.(2) 1996 results include a $300 million non-cash charge pertaining to the
implementation of SFAS 121 Accounting for the Impairment of Long-LivedAssets and for Long-Lived Assets to be Disposed Of, and a $225 millioncharge for costs related to the acquisition of ABC. The earnings per shareimpacts of these charges were $.30 and $.22, respectively. See Notes 2 and11 to the Consolidated Financial Statements.
(3) In 1993, the Company changed its accounting policy for project-relatedpre-opening costs, adopted SFAS 106 "Employers' Accounting forPostretirement Benefits Other Than Pensions" and adopted SFAS 109"Accounting for Income Taxes." The cumulative effect of these accountingchanges on the 1993 results follows.
Operating and net income for 1993 also reflect a $350 million charge to fullyreserve the Company's outstanding receivables from Euro Disney and theCompany's commitment to help fund Euro Disney for a limited period. Theearnings per share impact of the charge, net of income tax benefit, was $.64.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS
RESULTS OF OPERATIONS
On February 9, 1996, the Company acquired Capital Cities/ABC, Inc. ("ABC").The Company's results of operations have incorporated ABC's activity since
that date. To enhance comparability, certain information below is presented ona "pro forma" basis and reflects the acquisition of ABC as though it hadoccurred at the beginning of the respective periods presented. The pro formaresults are not necessarily indicative of the combined results that would haveoccurred had the acquisition actually occurred at the beginning of thoseperiods.
CONSOLIDATED RESULTS(in millions, except per share data)
(2) During the second quarter of 1996, the Company recorded two non-recurringcharges. The Company adopted Statement of Financial Accounting StandardsNo. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which resulted in the Company recognizinga $300 million non-cash charge. In addition, the Company recognized a $225million charge for costs related to the acquisition of ABC. See Notes 2and 11 to the Consolidated Financial Statements.
As a result of the acquisition, the Company has reconfigured its financialreporting segments into Creative Content, Broadcasting, and Theme Parks andResorts. Consumer products operations, ABC's publishing operations and filmedentertainment activities not related to broadcasting have been classified asCreative Content. Operations previously reported as Filmed Entertainment thatpertain to broadcasting, as well as ABC's broadcasting operations, have beenclassified as the Broadcasting segment. The Theme Parks and Resorts segmentcontains the same operations as in prior years.
The following discussion of 1996 versus 1995 performance is primarily basedon pro forma results. The Company believes pro forma results represent thebest comparative standard for assessing net income, changes in net income andearnings trends, as the pro forma presentation combines a full year of theresults of the Company and its acquired ABC operations. The discussion ofconsolidated results also includes "as reported" comparisons to the extentthere have been material changes in reported amounts.
The discussion of Theme Parks and Resorts segment results is on an asreported basis since the pro forma adjustments did not impact this segment.
CONSOLIDATED RESULTS
1996 VS. 1995 (PRO FORMA AND AS REPORTED)Pro forma results for all periods and as reported results since the
acquisition date reflect the impact of the acquisition of ABC, including theuse of purchase accounting. Comparisons of as reported results reflectsignificant increases in amortization of intangible assets, interest expense,the effective income tax rate and shares outstanding arising from the
Pro forma revenues increased 12% to $21.2 billion, reflecting growth in allbusiness segments. Net income, excluding non-recurring charges, increased 16%to $1.5 billion, and earnings per share increased 15% to $2.23. These resultswere driven by increased operating income at the Theme Parks and Resorts andBroadcasting segments.
Pro forma net interest expense decreased 10% to $698 million reflectinglower interest rates and a reduction in net borrowings (the Company'sborrowings less cash and liquid investments).
As reported revenues increased 54% to $18.7 billion, reflecting increases inall business segments and the impact of the acquisition of ABC. Net income,excluding the non-recurring charges, increased 11% to $1.5 billion driven byincreased operating income for each business segment. Earnings per share,excluding the non-recurring charges, decreased 5% to $2.48, reflecting theimpact of additional shares issued in connection with the acquisition.
As reported corporate activities and other increased 29% to $309 million,reflecting higher corporate general and administrative costs and a $55 milliongain in the prior year related to the sale of a portion of the Company'sinvestment in Euro Disney.
1995 VS. 1994 (AS REPORTED)Revenues increased 20% or $2.1 billion to $12.2 billion in 1995, reflecting
growth in Creative Content, Broadcasting and Theme Parks and Resorts revenuesof $1.5 billion, $55 million, and $502 million, respectively.
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Operating income rose 25% or $494 million to $2.5 billion in 1995, driven byincreases in Creative Content and Theme Parks and Resorts operating income of$326 million and $169 million, respectively. Net income increased 24% to $1.4billion and earnings per share increased 27% to $2.60 from $1.1 billion and$2.04, respectively.
Corporate activities and other expenses decreased 14% or $40 million to $239million. The results for 1995 included a gain of $55 million from the sale ofapproximately 75 million shares, or 20% of the Company's investment in EuroDisney, partially offset by higher corporate general and administrativeexpenses.
Net interest income decreased $120 million to an expense of $110 million in1995. The decrease reflected both a decline in interest income driven by loweraverage investment balances and yields and an increase in interest expenseprimarily reflecting the impact of higher borrowings. The higher borrowingswere due in part to prior-year common stock repurchases and Euro Disneyfunding, which were initiated in the latter part of 1994.
1996 VS. 1995 (PRO FORMA)Revenues increased 17% or $1.5 billion to $10.5 billion, driven by growth of
$500 million in home video, $274 million in theatrical, $197 million in theDisney Stores and $151 million in character merchandise licensing. Home videorevenues reflect Pocahontas, Cinderella and The Aristocats animated titles andThe Santa Clause, While You Were Sleeping and Crimson Tide live-action titlesdomestically, as well as The Lion King and 101 Dalmatians internationally.Theatrical revenues reflect the worldwide box office performance of Toy Story,The Rock and The Hunchback of Notre Dame, the international performance ofPocahontas and the domestic performance of Phenomenon. Revenue growth at theDisney Stores was driven by the opening of 101 new stores in 1996, bringingthe total number of stores to 530. Comparable store sales declined 2%,primarily due to the strength of The Lion King merchandise in the prior year,and new stores contributed $103 million of sales growth. Merchandise licensingrevenues increased due to the strength of standard characters worldwide andthe success of targeted marketing programs. Television revenues from programdistribution were comparable to the prior year, reflecting the success oflive-action titles in pay television, offset by the syndication sale of HomeImprovement in the prior year.
Operating income remained flat at $1.6 billion, reflecting improved resultsin home video and worldwide merchandise licensing offset by lower theatricalresults. Costs and expenses increased 21% or $1.5 billion. The increase isprimarily due to higher theatrical distribution and home video selling costs,higher production cost amortization, expansion of the Disney Stores and thewrite-off of certain theatrical development projects.
1995 VS. 1994 (AS REPORTED)Revenues increased 24% or $1.5 billion to $7.7 billion in 1995, driven by
growth of $605 million in worldwide home video revenues, $340 million intelevision revenues, $237 million from the Disney Stores, $106 million inworldwide theatrical revenues and $67 million from worldwide charactermerchandise licensing. Home video revenues reflected the domestic and initialinternational release of The Lion King and the worldwide release of Snow Whiteand the Seven Dwarfs. Television revenues grew primarily due to the release ofHome Improvement in syndication and increased availability and success oftitles in pay television. Growth at the Disney Stores was driven by theopening of 105 new stores in 1995, bringing the total number of stores to 429.Comparable store sales grew 4% and sales at new stores contributed $94 millionof sales growth. Theatrical revenues reflected the domestic rerelease andexpanded international release of The Lion King, the domestic release ofPocahontas and the domestic release of the live-action titles The SantaClause, While You Were Sleeping and Pulp Fiction. Worldwide merchandiselicensing growth was generated by increased demand for traditional Disneycharacters and recent animated film properties, principally The Lion King andPocahontas.
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Operating income increased 27% or $326 million to $1.5 billion in 1995,primarily due to growth in worldwide home video, television, worldwidecharacter merchandise licensing and the Disney Stores. Costs and expenses
increased 23% or $1.2 billion, principally due to higher home video marketingand distribution costs reflecting the worldwide release of Snow White and theSeven Dwarfs and the domestic release of The Lion King, the ongoing expansionand revenue growth of the Disney Stores, higher distribution costs related totheatrical releases and costs associated with the syndication of HomeImprovement.
BROADCASTING
1996 VS. 1995 (PRO FORMA)Revenues increased 4% or $267 million to $6.2 billion, reflecting a $309
million increase in revenues at ESPN and The Disney Channel, resulting fromhigher advertising revenues and affiliate fees due primarily to expansion,subscriber growth and improved advertising rates. Revenue increases werepartially offset by a $61 million decrease at the television network andstations due to the impact of ratings deterioration and the absence of theSuper Bowl in the current period.
Operating income increased 12% or $114 million to $1.1 billion, reflectingdecreased costs and expenses at the television network, revenue increases atESPN and The Disney Channel and lower program write-offs at KCAL. Costs andexpenses increased 3% or $153 million, reflecting increased program rights andproduction costs driven by growth at ESPN and The Disney Channelinternationally, partially offset by significantly decreased programamortization at the television network, primarily attributable to theacquisition, and lower program write-offs at KCAL.
1995 VS. 1994 (AS REPORTED)The results reported in each year were not material, and reflected the
Company's broadcasting operations prior to the acquisition of ABC.
THEME PARKS AND RESORTS
1996 VS. 1995Revenues increased 13% or $501 million to $4.5 billion, reflecting growth of
$191 million due to record theme park attendance, $148 million from greaterguest spending, and $52 million due to increased occupied rooms, primarily atFlorida resorts. Record theme park attendance at both the Walt Disney WorldResort and Disneyland Park in 1996 reflected growth in domestic andinternational tourist visitation. Increased guest spending resulted fromhigher admission prices, increased sales of food and beverages due to pricingand expanded locations, and higher room rates at hotel and resort properties.The increase in occupied rooms in Florida resulted from higher occupancy and acomplete year of operations at Disney's All-Star Music Resort, which opened inphases during 1995. Occupied rooms also increased due to the opening ofDisney's BoardWalk Resort in June 1996.
Fiscal 1996 operating income increased 15% or $131 million to $990 million,resulting primarily from higher theme park attendance, increased guestspending and increased occupied rooms at Florida resorts. Costs and expenses,which consist principally of labor, costs of merchandise, food and beveragessold, depreciation, repairs and maintenance, entertainment and marketing andsales expenses, increased 12% or $370 million, primarily due to increasedoperating hours in response to higher attendance, expansion of theme park
attractions and resorts, increased marketing and sales expenses and increasedcosts associated with higher guest spending and increased occupied rooms.
1995 VS. 1994Revenues increased 14% or $502 million to $4.0 billion, driven by growth of
$288 million from higher theme park attendance in Florida and California and$127 million from an increase in occupied rooms at Florida resorts. Highertheme park attendance reflected increased domestic and international touristvisitation. The increase in occupied rooms reflected the openings of Disney'sWilderness Lodge
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and Disney's All-Star Sports Resort in the third quarter of 1994 and thephased opening of Disney's All-Star Music Resort during 1995.
Operating income increased 24% or $169 million to $859 million in 1995,driven by higher theme park attendance and increased occupied rooms at Floridaresorts. Costs and expenses increased 12% or $333 million, primarily due toincreased attendance and occupied rooms, expansion of theme park attractionsand Florida resorts and increased marketing and sales expenses, partiallyoffset by the impact of ongoing cost reduction initiatives.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates significant cash from operations and has substantialborrowing capacity to meet its operating and discretionary spendingrequirements. Cash provided by operations increased 32% or $1.1 billion to$4.6 billion in 1996, which includes the impact of the acquistion of ABCdiscussed below.
Net borrowings increased $10.6 billion to $12.0 billion during fiscal 1996.The increase was primarily due to an increase in debt in connection with theacquisition of ABC.
In 1996, the Company invested $3.7 billion to develop, produce and acquirerights to film and television properties and $1.7 billion to design anddevelop new theme park attractions, resort properties, real estatedevelopments and other properties. 1995 investments totaled $1.9 billion and$896 million, respectively.
The $1.8 billion increased investment in film and television properties wasprimarily driven by ABC's television spending subsequent to the acquisition.Television expenditures in 1997 will be higher as they will reflect a fullyear of ABC's operations.
The $849 million increased investment in theme parks, resorts and otherproperties resulted from initiatives including Disney's Animal Kingdom, DisneyCruise Line, Disney's BoardWalk Resort, Disney's Coronado Springs Resort,Disney's Wide World of Sports, and the town of Celebration. Continued spendingincreases related to these projects and from development of additionalinitiatives, including Disney's California Adventure and Downtown Disney, areanticipated through 1997.
The Company repurchased 8 million shares of its common stock forapproximately $462 million in 1996. Under its share repurchase program, theCompany is authorized to purchase up to an additional 96 million shares. TheCompany evaluates share repurchase decisions on an ongoing basis, taking intoaccount borrowing capacity, management's target capital structure, and otherinvestment opportunities. The Company also used $271 million to fund dividendpayments during the year.
During the second quarter of 1996, the Company completed its acquisition ofABC. Aggregate consideration paid to ABC shareholders in March 1996 consistedof $10.1 billion in cash and 155 million shares of Company common stock. TheCompany initially funded the cash portion through the issuance ofapproximately $8.8 billion of commercial paper and the use of existing cashand investments. At acquisition, the Company assumed $627 million of ABC'slong-term debt.
Since the acquisition of ABC, the Company has replaced a portion of itscommercial paper with longer-term financing, and expects to continue thisprocess in the future. In the United States, the Company has issued $275million of medium-term notes maturing in two to fifteen years, and in theglobal bond market, the Company has issued $1.3 billion of five year notes and$1.3 billion of ten year notes. In Europe, the Company has issued 300 billionItalian lira (approximately $190 million) of four year notes, and borrowed(Pounds)335 million (approximately $520 million) through a private offering.In the Japanese market, the Company issued (Yen)150 billion (approximately$1.4 billion) of three-year bonds through two public offerings. The Companyhas swapped the interest payable on the foreign denominated borrowings intoUnited States dollar LIBOR.
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The Company employs a variety of on-and off-balance-sheet financialinstruments to manage its exposure to changes in interest rates andfluctuations in the value of foreign currencies. The Company does not expectinterest rate movements or fluctuations in the value of foreign currencies tosignificantly affect its liquidity in the foreseeable future. For 1996 and1995, a 1% increase or decrease in interest rates would not have had amaterial impact on the Company's liquidity or operating results.
The Company currently maintains significant borrowing capacity to takeadvantage of growth and investment opportunities. The Company focuses on netborrowings, which take into account its cash and investment balances, whenmonitoring borrowing capacity. The Company's borrowing capacity includes a $5billion line of credit which is available for general corporate purposes andto support commercial paper issuance. The Company has the capacity to issue upto $2.1 billion in additional debt under a U.S. shelf registration filed inMarch 1996, and $1.2 billion under a Euro Medium-Term Note Program establishedin June 1996.
The Company sold its Los Angeles television station KCAL in November 1996for $387 million in cash.
The Company's financial condition remains strong. The Company believes thatits cash, other liquid assets, operating cash flows and access to capitalmarkets taken together provide adequate resources to fund ongoing operatingrequirements and future capital expenditures related to the expansion ofexisting businesses and development of new projects.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Supplemental Data on page 27.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORSInformation regarding directors appearing under the caption ELECTION OF
DIRECTORS in the Company's Proxy Statement for the 1997 Annual Meeting ofStockholders (the "1997 Proxy Statement") is hereby incorporated by reference.
Information regarding executive officers is included in Part I of this Form10-K as permitted by General Instruction G(3).
ITEM 11. EXECUTIVE COMPENSATION
Information appearing under the captions DIRECTORS' REMUNERATION; ATTENDANCEand EXECUTIVE COMPENSATION in the 1997 Proxy Statement is hereby incorporatedby reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information setting forth the security ownership of certain beneficialowners and management appearing under the caption STOCK OWNERSHIP OF CERTAINBENEFICIAL OWNERS and STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS inthe 1997 Proxy Statement is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain related transactions appearing under thecaption RELATED TRANSACTIONS in the 1997 Proxy Statement is herebyincorporated by reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits and Financial Statements and Schedules
(1) Financial Statements and Schedules
See Index to Financial Statements and Supplemental Data at page 27.
(2) Exhibits
3(a) Restated Certificate of Incorporation of the Company, filed asExhibit 3(a) to the Form 8-B/A, dated January 23, 1996, is herebyincorporated by reference.
3(b) Amended Bylaws of the Company, dated April 22, 1996, is filedherewith.
4(a) Form of Registration Rights Agreement entered into or to beentered into with certain stockholders of the Company, filed asExhibit B to Exhibit 2.1 to the Current Report on Form 8-K, datedJuly 31, 1995, of Disney Enterprises, Inc., is hereby incorporatedby reference.
4(b) Rights Agreement dated as of November 8, 1995 between the Companyand The Bank of New York, as rights agent, filed as Exhibit 4.2 tothe Registration Statement on Form S-4, dated November 13, 1995,(No. 33-64141), is hereby incorporated by reference.
4(c) 364-Day Credit Agreement, dated as of October 30, 1996, among theCompany, as Borrower, Citicorp USA, Inc., as Administrative Agent,Credit Suisse and Bank of America National Trust and SavingsAssociation, as Co-Administrative Agents and the FinancialInstitutions named therein, is filed herewith.
4(d) Five-Year Credit Agreement, dated October 30, 1996, among theCompany, as Borrower, Citicorp USA, Inc., as Administrative Agent,Credit Suisse and Bank of America National Trust and SavingsAssociation, as Co-Administrative Agents and the FinancialInstitutions named therein, is filed herewith.
4(e) Indenture, dated as of November 30, 1990, between DisneyEnterprises, Inc. and Bankers Trust Company, as Trustee, withrespect to certain senior debt securities of the Company, filed asExhibit 2 to the Company's Current Report on Form 8-K, datedJanuary 14, 1991, is hereby incorporated by reference.
4(f) Indenture, dated as of March 7, 1996, between the Company andCitibank, N.A., as Trustee, with respect to certain senior debtsecurities of the Company, filed as Exhibit 4.1(a) to theCompany's Current Report on Form 8-K, dated March 7, 1996, ishereby incorporated by reference.
4(g) Other long-term borrowing instruments issued by the Company areomitted pursuant to Item 601(b) (4) (iii) of Regulation S-K. TheCompany undertakes to furnish copies of such instruments to theCommission upon request.
10(a) (i) Agreement on the Creation and the Operation of Euro Disneylanden France, dated March 25, 1987, and (ii) Letter relating theretoof Michael D. Eisner, Chairman Disney Enterprises, Inc., datedMarch 24, 1987, filed as Exhibits 10(b) and 10(a), respectively,to Disney Enterprises, Inc.'s Current Report on Form 8-K datedApril 24, 1987, are hereby incorporated by reference.
10(b) Limited Recourse Financing Facility Agreement, dated as of April27, 1988, among Disney Enterprises, Inc., Citibank Channel IslandLimited and Citicorp International, filed as Exhibit 10(a) toDisney Enterprises, Inc.'s Current Report on Form 8-K dated April29, 1988, is hereby incorporated by reference.
10(c) (i) Employment Agreement, dated as of January 10, 1989, betweenDisney Enterprises, Inc. and Michael D. Eisner, filed as Exhibit10(a) to Disney Enterprises, Inc.'s Quarterly Report on Form 10-Qfor the period ended March 31, 1989; (ii) Agreement, dated March1, 1985, between Disney Enterprises, Inc. and Michael D. Eisner,filed as
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Exhibit 2 to Disney Enterprises, Inc.'s Quarterly Report on Form10-Q for the period ended June 30, 1985; and (iii) description ofaction by the Compensation Committee taken on November 30, 1990,filed as Exhibit 10(c) to Disney Enterprises, Inc.'s Annual Reporton Form 10-K for the year ended September 30, 1990, are herebyincorporated by reference.
10(e) Employment Agreement, dated October 1, 1995, between DisneyEnterprises, Inc. and Michael S. Ovitz filed as Exhibit 10(e) toDisney Enterprises, Inc.'s Annual Report on Form 10-K for the yearended September 30, 1995, is hereby incorporated by reference.
10(f) (i) Contract, dated December 14, 1979, with E. Cardon Walker, topurchase a 2% interest in certain motion pictures to be producedby Disney Enterprises, Inc. and to acquire an additional 2% profitparticipation; and (ii) Amendment thereto, dated August 8, 1980,filed as Exhibits 1 and 3, respectively, to Disney Enterprises,Inc.'s Annual Report on Form 10-K for the year ended September 30,1980, are hereby incorporated by reference.
10(g) Form of Indemnification Agreement entered into or to be enteredinto by certain officers and directors of Disney Enterprises, Inc.as determined from time to time by the Board of Directors,included as Annex C to the Proxy Statement for Disney Enterprises,Inc.'s 1988 Annual Meeting of Stockholders, is hereby incorporatedby reference.
10(h) 1995 Stock Option Plan for Non-Employee Directors, filed asExhibit A to the Proxy Statement for Disney Enterprises, Inc.'s1995 Annual Meeting of Stockholders, is hereby incorporated byreference.
10(i) (i) 1990 Stock Incentive Plan and Rules, filed as Exhibits 28(a)and 28(b), respectively, to Disney Enterprises, Inc.'sRegistration Statement on Form S-8 (No. 33-39770), dated April 5,1991, and (ii) Amended and Restated 1990 Stock Incentive Plan andRules, attached as Appendix B-2 to Disney Enterprises, Inc.'sJoint Proxy Statement/ Prospectus included in the RegistrationStatement on Form S-4, dated November 13, 1995 (No. 33-64141), ishereby incorporated by reference.
10(j) 1995 Stock Incentive Plan and Rules, attached as Appendix B-1 toDisney Enterprises, Inc.'s Joint Proxy Statement/Prospectusincluded in the Registration Statement on Form S-4, dated November13, 1995 (File No. 33-64141), is hereby incorporated by reference.
10(k) (i) 1987 Stock Incentive Plan and Rules, (ii) 1984 Stock IncentivePlan and Rules, (iii) 1981 Incentive Plan and Rules and (iv) 1980Stock Option Plan, all as set forth as Exhibits 1(a), 1(b), 2(a),2(b), 3(a), 3(b) and 4, respectively, to the Prospectus containedin Part I of Disney Enterprises, Inc.'s Registration Statement onForm S-8 (No. 33-26106), dated December 20, 1988, are herebyincorporated by reference.
10(l) Contingent Stock Award Rules under Disney Enterprises, Inc.'s 1984Stock Incentive Plan, filed as Exhibit 10(t) to DisneyEnterprises, Inc.'s Annual Report on Form 10-K for the year endedSeptember 30, 1986, is hereby incorporated by reference.
10(m) 1996 Cash Bonus Performance Plan, filed as Exhibit 10(m) to DisneyEnterprises, Inc.'s Annual Report on Form 10-K for the year endedSeptember 30, 1995, is hereby incorporated by reference.
10(n) Disney Salaried Retirement Plan, as amended through March 1, 1994,filed as Exhibit 10(l) to Disney Enterprises, Inc.'s Annual Reporton Form 10-K for the year ended September 30, 1994, is herebyincorporated by reference.
10(o) The Walt Disney Company and Associated Companies Key EmployeesDeferred Compensation and Retirement Plan, filed as Exhibit 10(u)to Disney Enterprises, Inc.'s Annual Report on Form 10-K for theyear ended September 30, 1985, is hereby incorporated byreference.
10(p) Group Term Life Insurance Plan (summary plan description), filedas Exhibit 10(x) to Disney Enterprises, Inc.'s Annual Report onForm 10-K for the year ended September 30, 1985, is herebyincorporated by reference.
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10(q) Group Personal Excess Liability Insurance Plan (summary plandescription), filed as Exhibit 10(z) to Disney Enterprises, Inc.'sAnnual Report on Form 10-K for the year ended September 30, 1986,is hereby incorporated by reference.
10(r) Family Income Assurance Plan (summary plan description), filed asExhibit 10(aa) to the Annual Report on Form 10-K for the yearended September 30, 1986, is hereby incorporated by reference.
10(s) Disney Salaried Savings and Investment Plan, as amended andrestated, filed as Exhibit 10(s) to Disney Enterprises, Inc.'sAnnual Report on Form 10-K for the year ended September 30, 1995,is hereby incorporated by reference.
10(t) Disney Salaried Savings and Investment Trust Agreement, dated June30, 1992, filed as Exhibit 10 to Disney Enterprises, Inc.'sQuarterly Report on Form 10-Q for the period ended June 30, 1992,is hereby incorporated by reference.
10(u) Master Trust Agreement for Employees Savings and Retirement Plans,as amended and restated through June 1, 1990, between DisneyEnterprises, Inc. and Bankers Trust Company, as Trustee, filed asExhibit 28(b) to Disney Enterprises, Inc.'s Registration Statementon Form S-8 (No. 33-35405), dated June 14, 1990, is herebyincorporated by reference.
10(v) Employee Stock Option Plan of Capital Cities/ABC, Inc., as amended
through December 15, 1987, filed as Exhibit 10(f) to CapitalCities/ABC, Inc.'s Annual Report on Form 10-K for the year endedDecember 31, 1992, is hereby incorporated by reference.
10(w) Amended and Restated 1991 Stock Option Plan of Capital Cities/ABC,Inc., filed as Exhibit 6(a)(i) to the Company's Quarterly Reporton Form 10-Q for the period ended March 31, 1996, is herebyincorporated by reference.
10(x) Amended and Restated Agreement and Plan of Reorganization, datedas of July 31, 1995, between Disney Enterprises, Inc. and CapitalCities/ABC, Inc., filed as Exhibit 2.1 to Disney Enterprises,Inc.'s Current Report on Form 8-K, dated October 6, 1995, ishereby incorporated by reference.
10(y) First Amendment to the Disney Salaried Retirement Plan as amendedand restated effective January 1, 1988, filed as Exhibit (10) toDisney Enterprises, Inc.'s Quarterly Report on Form 10-Q for theperiod ended December 31, 1995, is hereby incorporated byreference.
21 Subsidiaries of the Company is filed herewith.23 Consent of Price Waterhouse LLP, the Company's independent
accountants, is included herein at page 28.27 Financial Data Schedule (filed electronically only).28(a) Financial statements with respect to the Disney Salaried Savings
and Investment Plan for the year ended December 31, 1995, filed asExhibit 28 to Disney Enterprises, Inc.'s Annual Report on Form 10-K for the year ended September 30, 1995, as amended by AmendmentNo. 1 on Form 10-K/A dated June 30, 1996, are hereby incorporatedby reference.
(b) Reports on Form 8-K
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.
THE WALT DISNEY COMPANY-----------------------------------------------------
(Registrant)
Date: December 19, 1996 By: MICHAEL D. EISNER-----------------------------------------------------(Michael D. Eisner, Chairman of the Board and Chief
Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, thisreport has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.
RICHARD A. NUNIS Director December 19, 1996-----------------------------(Richard A. Nunis)</TABLE>
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<TABLE><CAPTION>Signature Title Date--------- ----- ----<S> <C> <C>MICHAEL S. OVITZ Director December 19, 1996------------------------(Michael S. Ovitz)
LEO J. O'DONOVAN, S.J. Director December 19, 1996------------------------(Leo J. O'Donovan, S.J.)
SIDNEY POITIER Director December 19, 1996------------------------(Sidney Poitier)
IRWIN E. RUSSELL Director December 19, 1996------------------------(Irwin E. Russell)
ROBERT A.M. STERN Director December 19, 1996------------------------(Robert A.M. Stern)
E. CARDON WALKER Director December 19, 1996------------------------(E. Cardon Walker)
RAYMOND L. WATSON Director December 19, 1996------------------------(Raymond L. Watson)
GARY L. WILSON Director December 19, 1996------------------------(Gary L. Wilson)</TABLE>
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THE WALT DISNEY COMPANY AND SUBSIDIARIESINDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
<S> <C>Report of Independent Accountants and Consent of Independent Accountants.. 28Consolidated Financial Statements of The Walt Disney Company andSubsidiariesConsolidated Statements of Income for the Years Ended September 30,1996, 1995 and 1994.................................................... 29
Consolidated Balance Sheets as of September 30, 1996 and 1995........... 30Consolidated Statements of Cash Flows for the Years Ended September 30,1996, 1995 and 1994.................................................... 31
Notes to Consolidated Financial Statements.............................. 32Quarterly Financial Summary............................................. 47
</TABLE>
Schedules other than those listed above are omitted for the reason that theyare not applicable or the required information is included in the financialstatements or related notes.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of The Walt Disney Company
In our opinion, the consolidated financial statements listed in theaccompanying index present fairly, in all material respects, the financialposition of The Walt Disney Company and its subsidiaries (the "Company") atSeptember 30, 1996 and 1995, and the results of their operations and theircash flows for each of the three years in the period ended September 30, 1996,in conformity with generally accepted accounting principles. These financialstatements are the responsibility of the Company's management; ourresponsibility is to express an opinion on these financial statements based onour audits. We conducted our audits of these statements in accordance withgenerally accepted auditing standards which require that we plan and performthe audits to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, ona test basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, and evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for theopinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the Companyadopted the provisions of the Financial Accounting Standard Board's Statementof Financial Accounting Standards 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," in fiscal 1996.
We hereby consent to the incorporation by reference in the prospectusesconstituting part of the Registration Statements on Form S-8 (Nos. 33-26106,33-35405 and 33-39770) and Form S-3 (Nos. 33-49891 and 33-62777) of The WaltDisney Company of our report dated November 25, 1996 which appears above.
PRICE WATERHOUSE LLP
Los Angeles, CaliforniaDecember 19, 1996
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CONSOLIDATED STATEMENTS OF INCOME(In millions, except per share data)
<TABLE><CAPTION>September 30 1996 1995-------------------------------------------------------------------------------<S> <C> <C>ASSETSCash and cash equivalents $ 278 $ 1,077Investments 454 866Receivables 3,343 1,793Inventories 951 824Film and television costs 3,912 2,099Theme parks, resorts and other property, at costAttractions, buildings and equipment 11,019 8,340Accumulated depreciation (4,448) (3,039)
------- -------6,571 5,301
Projects in process 1,342 778Land 118 111
------- -------8,031 6,190
Intangible assets, net 17,978 --Other assets 2,359 1,757
------- -------$37,306 $14,606======= =======
LIABILITIES AND STOCKHOLDERS' EQUITYAccounts payable and other accrued liabilities $ 6,374 $ 2,843Income taxes payable 582 200Borrowings 12,342 2,984Unearned royalty and other advances 1,179 861Deferred income taxes 743 1,067Stockholders' equityPreferred stock, $.01 par value; $.10 at September 30, 1995Authorized--100 million sharesIssued--none
Common stock, $.01 par value; $.025 at September 30, 1995Authorized--1.2 billion sharesIssued--682 million shares and 575 million shares 8,576 1,226
Retained earnings 7,933 6,990Cumulative translation and other adjustments 39 38
------- -------16,548 8,254
Less treasury stock, at cost, 8 million shares and 51million shares (462) (1,603)
CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions)
<TABLE><CAPTION>Year ended September 30 1996 1995 1994------------------------------------------------------------------------------<S> <C> <C> <C>NET INCOME $ 1,214 $ 1,380 $ 1,110CHARGES TO INCOME NOT REQUIRING CASH OUTLAYSAmortization of film and television costs 2,966 1,383 1,199Depreciation 677 470 410Amortization of intangible assets 301 -- --Accounting change 300 -- --Other 22 133 231
CHANGES IN (including the impact of the ABCacquisition)Investments in trading securities 85 1 --Receivables (426) (122) (280)Inventories (95) (156) (59)Other assets (160) (288) (81)Accounts and taxes payable and accruedliabilities (455) 415 136
Unearned royalty and other advances 274 161 (141)Deferred income taxes (78) 133 283
--------- ------- -------3,411 2,130 1,698
--------- ------- -------CASH PROVIDED BY OPERATIONS 4,625 3,510 2,808
--------- ------- -------INVESTING ACTIVITIESAcquisition of ABC, net of cash acquired (8,432) -- --Film and television costs (3,678) (1,886) (1,434)Investments in theme parks, resorts and otherproperty (1,745) (896) (1,026)
Purchases of marketable securities (18) (1,033) (953)Proceeds from sales of marketable securities 409 1,460 1,494Other -- 67 (968)
--------- ------- -------(13,464) (2,288) (2,887)
--------- ------- -------FINANCING ACTIVITIESBorrowings 13,560 786 1,866Reduction of borrowings (4,872) (772) (1,315)Repurchases of common stock (462) (349) (571)Dividends (271) (180) (153)Exercise of stock options and other 85 183 76
(Tabular dollars in millions, except per share amounts)
1 Description of the Business and Summary of Significant Accounting Policies
The Walt Disney Company, together with its subsidiaries (the "Company"), isa diversified international entertainment organization. As discussed in Note2, the Company acquired Capital Cities/ABC, Inc. ("ABC") on February 9, 1996.As a result of the acquisition, the Company has reconfigured its financialreporting segments into Creative Content, Broadcasting and Theme Parks andResorts. Consumer products operations, ABC's publishing operations and filmedentertainment activities not related to broadcasting have been classified asCreative Content. Operations previously reported as Filmed Entertainment thatpertain to broadcasting, as well as ABC's broadcasting operations, have beenclassified as the Broadcasting segment. The Theme Parks and Resorts segmentcontains the same operations as in prior years. The Company's businesssegments are described below.
CREATIVE CONTENTThe Company produces and acquires live-action and animated motion pictures
for distribution to the theatrical, home video and television markets. TheCompany also produces original television programming for the network andfirst-run syndication markets. The Company distributes its filmed productthrough its own distribution and marketing companies in the United States andmost foreign markets.
The Company licenses the name "Walt Disney," as well as the Company'scharacters, visual and literary properties and songs and music, to variousconsumer manufacturers, retailers, show promoters and publishers throughoutthe world. The Company also engages in direct retail distribution principallythrough the Disney Stores, and produces books and magazines for the generalpublic in the United States and Europe. In addition, the Company producesaudio products for all markets, as well as film, video and computer softwareproducts for the educational marketplace.
The Company also publishes newspapers, technical and specialty publicationsand provides research and database services, primarily for markets in theUnited States.
BROADCASTINGThe Company operates the ABC Television Network which has primary and
secondary affiliated stations providing coverage to U.S. televisionhouseholds. The Company also owns television and radio stations affiliatedwith the ABC Television Network and the ABC Radio Networks. The Company'sCable and International Broadcast operations include domestic, European,Taiwanese, Japanese and Australian operations, and are principally involved inthe production and distribution of cable television programming, the licensingof programming to domestic and international markets and investing in jointventures in foreign-based television operations and television production anddistribution entities. The primary domestic cable programming services, whichoperate through joint ventures, are ESPN, the A&E Television Networks andLifetime Television. The Company provides programming for and operates TheDisney Channel, a television programming service.
THEME PARKS AND RESORTSThe Company operates the Walt Disney World Resort(R) in Florida, and
Disneyland Park(R), the Disneyland Hotel and the Disneyland Pacific Hotel inCalifornia. The Walt Disney World Resort includes the Magic Kingdom, Epcot andthe Disney-MGM Studios Theme Park, twelve resort hotels and a complex ofvillas and suites, a nighttime entertainment complex, a shopping village,conference centers, campgrounds, golf courses, water parks and otherrecreational facilities. The Company earns royalties on revenues generated bythe Tokyo Disneyland(R) theme park near Tokyo, Japan, which is owned andoperated by an unrelated Japanese corporation. The Company also has aninvestment in
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Euro Disney S.C.A. ("Euro Disney"), a publicly held French corporation thatoperates Disneyland Paris. The Company's Walt Disney Imagineering unit designsand develops new theme park concepts and attractions, as well as resortproperties. The Company also manages and markets vacation ownership interestsin the Disney Vacation Club. Included in Theme Parks and Resorts are theCompany's National Hockey League franchise, the Mighty Ducks of Anaheim, andits ownership interest in the Anaheim Angels, a Major League Baseball team.
SIGNIFICANT ACCOUNTING POLICIESPrinciples of Consolidation
The consolidated financial statements of the Company include the accounts ofThe Walt Disney Company and its subsidiaries after elimination of intercompanyaccounts and transactions. Investments in unconsolidated affiliated companiesare accounted for using the equity method, and are classified in theconsolidated balance sheets as "Other assets." The Company's share of earningsor losses in its equity investments is shown under "Corporate activities andother" in the consolidated statements of income.
During the second quarter of 1996, the Company adopted SFAS 121 Accountingfor the Impairment of Long-Lived Assets and for Long-Lived Assets to beDisposed Of ("SFAS 121") (see Note 11). Long-lived assets to be held and usedare recorded at cost. Management reviews long-lived assets and the relatedintangible assets for impairment whenever events or changes in circumstancesindicate the carrying amount of such assets may not be recoverable.Recoverability of these assets is determined by comparing the forecastedundiscounted net cash flows of the operation to which the assets relate, tothe carrying amount including associated intangible assets of such operation.If the operation is determined to be unable to recover the carrying amount ofits assets, then intangible assets are written down first, followed by theother long-lived assets of the operation, to fair value. Fair value isdetermined based on discounted cash flows or appraised values, depending uponthe nature of the assets.
Use of EstimatesThe preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates andassumptions that affect the amounts reported in the financial statements andfootnotes thereto. Actual results could differ from those estimates.
Revenue RecognitionRevenues from the theatrical distribution of motion pictures are recognized
when motion pictures are exhibited. Revenues from video sales are recognizedon the date that video units are made widely available for sale by retailers.Revenues from the licensing of feature films and television programming arerecorded when the material is available for telecasting by the licensee andwhen certain other conditions are met.
Broadcast advertising revenues are recognized when commercials are aired.Revenues from television subscription services related to the Company'sprimary cable programming services are recognized as services are provided.
Revenues from participants and sponsors at the theme parks are generallyrecorded over the period of the applicable agreements commencing with theopening of the related attraction.
Cash, Cash Equivalents and InvestmentsCash and cash equivalents consist of cash on hand and marketable securities
with original maturities of three months or less.
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Debt and equity securities are classified into one of three categories. Debtsecurities that the Company has the positive intent and ability to hold tomaturity are classified as "held-to-maturity" and reported at amortized cost.Debt securities not classified as held-to-maturity and marketable equitysecurities are classified as either "trading" or "available-for-sale," and arerecorded at fair value with unrealized gains and losses included in earningsor stockholders' equity, respectively.
InventoriesCarrying amounts of merchandise, materials and supplies inventories are
generally determined on a moving average cost basis and are stated at thelower of cost or market.
Film and Television CostsFilm and television production and participation costs are expensed based on
the ratio of the current period's gross revenues to estimated total grossrevenues from all sources on an individual production basis. Estimates oftotal gross revenues can change significantly due to the level of marketacceptance of film and television products. Accordingly, revenue estimates arereviewed periodically and amortization is adjusted. Such adjustments couldhave a material effect on results of operations in future periods.
Television broadcast program licenses and rights and related liabilities arerecorded when the license period begins and the program is available for use.Television network and station rights for theatrical movies and other long-form programming are charged to expense primarily on accelerated bases relatedto the usage of the program. Television network series costs and multi-yearsports rights are charged to expense based on the flow of anticipated revenue.
Theme Parks, Resorts and Other PropertyTheme parks, resorts and other property are carried at cost. Depreciation is
computed on the straight-line method based upon estimated useful lives rangingfrom three to fifty years.
Intangible/Other AssetsRights to the name, likeness and portrait of Walt Disney and other
intangible assets are amortized over periods ranging from two to forty years.The Company continually reviews the recoverability of the carrying value ofthese assets using the methodology prescribed in SFAS 121.
Risk Management ContractsIn the normal course of business, the Company employs a variety of off-
balance-sheet financial instruments to manage its exposure to fluctuations ininterest and foreign currency exchange rates, including interest rate andcross-currency swap agreements, forward and option contracts, and interestrate exchange-traded futures. The Company designates interest rate and cross-currency swaps as hedges of investments and debt, and accrues the differentialto be paid or received under the agreements as interest rates change over thelives of the contracts. Differences paid or received on swap agreements arerecognized as adjustments to interest income or expense over the life of theswaps, thereby adjusting the effective interest rate on the underlyinginvestment or obligation. Gains and losses on the termination of swapagreements, prior to their original maturity, are deferred and amortized tointerest income or expense over the remaining term of the underlying hedgedtransactions. Gains and losses arising from interest rate futures, forward andoption contracts, and foreign currency forward and option contracts arerecognized in income or expense as offsets of gains and losses resulting fromthe underlying hedged transactions.
Cash flows from interest rate and foreign exchange risk managementactivities are classified in the same category as the cash flows from therelated investment, borrowing or foreign exchange activity.
The Company classifies its derivative financial instruments as held or
Earnings Per ShareEarnings per share amounts are based upon the weighted average number of
common and common equivalent shares outstanding during the year. Commonequivalent shares are excluded from the computation in periods in which theyhave an anti-dilutive effect.
ReclassificationsCertain reclassifications have been made in the 1995 and 1994 financial
statements to conform to the 1996 presentation.
2 Acquisition
On February 9, 1996, the Company completed its acquisition of ABC. Pursuantto the acquisition, aggregate consideration paid to ABC shareholders consistedof $10.1 billion in cash and 155 million shares of Company common stock valuedat $8.8 billion based on the stock price as of the date the transaction wasannounced.
The acquisition has been accounted for as a purchase and the acquisitioncost of $18.9 billion has been allocated to the assets acquired andliabilities assumed based on estimates of their respective fair values. Assetsacquired totaled $4.8 billion (of which $1.5 billion was cash) and liabilitiesassumed were $4.4 billion. A total of $18.3 billion, representing the excessof acquisition cost over the fair value of ABC's net tangible assets, has beenallocated to intangible assets and is being amortized over forty years.
In connection with the acquisition, all common shares of the Companyoutstanding immediately prior to the effective date of the acquisition werecanceled and replaced with new common shares and all treasury shares werecanceled and retired.
The Company's consolidated results of operations have incorporated ABC'sactivity from the effective date of the acquisition. The unaudited pro formainformation below presents combined results of operations as if theacquisition had occurred at the beginning of the respective periods presented.The unaudited pro forma information is not necessarily indicative of theresults of operations of the combined company had the acquisition occurred atthe beginning of the periods presented, nor is it necessarily indicative offuture results.
<TABLE><CAPTION>
(in millions, except per share data)Period Ended September 30,
Net income (1) 1,350 1,326Earnings per share (1) 1.96 1.94
</TABLE>--------(1) The 1996 period includes the impact of a $300 million non-cash charge
related to the initial adoption of a new accounting standard (see Note11). The charge reduced earnings per share by $0.27 for the period.
In addition, during the second quarter, the Company recognized a $225million charge for costs related to the acquisition, which are not included inthe above pro forma amounts. Acquisition-related costs consist principally ofinterest costs related to imputed interest for the period from the effectivedate of the acquisition until March 14, 1996, the date that cash and stockconsideration was issued to ABC shareholders.
The Company entered into an agreement to sell its independent Los Angelestelevision station as a result of the ABC acquisition. The sale of KCAL-TV for$387 million was completed on November 22, 1996, resulting in a gain ofapproximately $135 million which will be recognized in 1997's incomestatement.
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3 Investment in Euro Disney
Euro Disney operates the Disneyland Paris theme park and resort complex on a4,800-acre site near Paris, France. The Company accounts for its 39% ownershipinterest in Euro Disney using the equity method of accounting. As of September30, 1996, the Company's recorded investment in Euro Disney was $430 million.The quoted market value of the Company's Euro Disney shares at September 30,1996 was approximately $634 million.
During fiscal year 1994, the Company entered into restructuring agreementswith Euro Disney and the lenders participating in a financial restructuringfor Euro Disney (the "Lenders") to provide certain debt, equity and leasefinancing to Euro Disney. In addition, the Company agreed to cancel certainfully-reserved receivables and waive royalties and base management fees for aperiod of five years and reduce such amounts for a specified periodthereafter.
As part of the overall restructuring, the Lenders served as underwriters for51% of the Euro Disney rights offering, agreed to forgive certain interestcharges of Euro Disney, having a present value of approximately $300 million,and deferred all principal payments until three years later than originallyscheduled. Pursuant to the terms of the restructuring, interest charges willcontinue to progressively increase through fiscal year 2003, althoughsubstantially all of the interest will have been reinstated by the end offiscal year 1998. Additionally, Euro Disney will begin paying royalties andmanagement fees commencing in fiscal year 1999.
Also as part of the restructuring, the Company agreed to arrange for theprovision of a 10-year unsecured standby credit facility of approximately $210million, upon request, bearing interest at PIBOR. As of September 30, 1996,
Euro Disney had not requested the Company to establish this facility. TheCompany also agreed, as long as any obligations to the Lenders areoutstanding, to maintain ownership of at least 34% of the outstanding commonstock of Euro Disney until June 1999, at least 25% for the subsequent fiveyears and at least 16.67% for an additional term thereafter.
In connection with the restructuring, Euro Disney Associes S.N.C. ("DisneySNC"), a wholly-owned affiliate of the Company, entered into a leasearrangement with a noncancelable term of 12 years (the "Lease") related tosubstantially all of the Disneyland Paris theme park assets, and then enteredinto a 12-year sublease agreement (the "Sublease") with Euro Disney. Remaininglease rentals at September 30, 1996 of FF 9.8 billion ($1.9 billion)receivable from Euro Disney under the Sublease approximate the amounts payableby Disney SNC under the Lease. At the conclusion of the Sublease term, EuroDisney will have the option to assume Disney SNC's rights and obligationsunder the Lease. If Euro Disney does not exercise its option, Disney SNC maypurchase the assets, continue to lease the assets or elect to terminate theLease, in which case Disney SNC would make a termination payment to the lessorequal to 75% of the lessor's then outstanding debt related to the theme parkassets, estimated to be $1.5 billion; Disney SNC could then sell or lease theassets on behalf of the lessor to satisfy the remaining debt, with any excessproceeds payable to Disney SNC.
Euro Disney's consolidated financial statements are prepared in accordancewith accounting principles generally accepted in France ("French GAAP"). U.S.generally accepted accounting principles ("U.S. GAAP") differ in certainsignificant respects from French GAAP applied by Euro Disney, principally asthey relate to accounting for leases and the calculation of interest expenserelating to debt affected by Euro Disney's financial restructuring. TheCompany records its pro rata equity share of Euro Disney's operating resultscalculated in accordance with U.S. GAAP.
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4 Film and Television Costs<TABLE><CAPTION>
1996 1995------------------------------------------<S> <C> <C>Theatrical Film CostsReleased, less amortization $ 944 $ 632In-process 1,947 970
------ ------2,891 1,602
------ ------Television CostsReleased, less amortization 303 274In-process 168 120
Based on management's total gross revenue estimates as of September 30, 1996,approximately 89% of unamortized film and television costs (except in-process)are expected to be amortized during the next three years.
======= ======</TABLE>--------(a) In support of the issuance of commercial paper to fund the cash portion of
the ABC purchase price (see Note 2), the Company established bankfacilities in October 1995 totaling $12 billion. A portion of thecommercial paper issued was subsequently refinanced into longer-termborrowings, and the bank facilities were refinanced to $7 billion. InOctober 1996, these facilities were further refinanced to $5 billion andexpire in one to five years. Under the bank facilities, the Company hasthe option to borrow at various interest rates.
(b) Includes approximately $600 million of borrowings previously issued byABC, Inc. and $300 million of borrowings due in 2093. The effectiveinterest rate reflects the effect of interest rate swaps entered into withrespect to certain of these borrowings.
(c) Denominated principally in U.S. dollars, Japanese yen, Australian dollars,and Italian lira. The effective interest rate reflects the effect ofinterest rate and cross-currency swaps entered into with respect tocertain of these borrowings.
(d) The average coupon rate is 2.7% on $1.3 billion face value of notes.Additional interest may be paid based on the performance of designatedportfolios of films.
Borrowings, excluding commercial paper, have the following scheduledmaturities:
The Company capitalizes interest on assets constructed for its theme parks,resorts and other property, and on theatrical and television productions inprocess. In 1996, 1995 and 1994, respectively, total interest costs incurredwere $545, $236 and $172 million, of which $66, $58 and $52 million werecapitalized.
6 Income Taxes
<TABLE><CAPTION>
1996 1995 1994--------------------------------------------------------<S> <C> <C> <C>Income Before Income TaxesDomestic (including U.S. exports) $1,822 $1,908 $1,514Foreign subsidiaries 239 209 189
<TABLE><CAPTION>Components of Deferred Tax Assets and Liabilities 1996 1995-----------------------------------------------------------------------<S> <C> <C>Deferred tax assets:Accrued liabilities $(1,863) $ (440)Investment in Euro Disney (74) (153)Other--net (20) (13)
<TABLE><CAPTION>Reconciliation of Effective Income Tax Rate 1996 1995 1994------------------------------------------------------------------<S> <C> <C> <C>Federal income tax rate 35.0% 35.0% 35.0%Nondeductible amortization of intangible assets 5.1 -- --State taxes, net of Federal income tax benefit 3.7 1.9 2.1Other--net (2.7) (2.1) (2.3)
---- ---- ----41.1% 34.8% 34.8%==== ==== ====
</TABLE>
In 1996 and 1995, income tax benefits of $44 and $90 million, respectively,were allocated to stockholders' equity. Such benefits were attributable toemployee stock option transactions.
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7 Pension and Other Benefit Programs
The Company maintains pension plans and postretirement medical benefit planscovering most of its domestic employees not covered by union or industry-wideplans. Employees hired after January 1, 1994 are not eligible for thepostretirement medical benefit plans. Pension benefits are generally based onyears of service and/or compensation. The following summarizes the balancesheet impact, as well as the benefit obligations, assets, funded status andrate assumptions associated with the pension and postretirement medicalbenefit plans.
------- ----- ------- -------Fair value of plans' assetsBeginning fair value 632 485 107 78ABC's plans at acquisition 631 -- -- --Actual return on plans' assets 149 102 20 16Contributions 74 72 23 16Benefits paid (44) (27) (12) (3)
------- ----- ------- -------Ending fair value 1,442 632 138 107
------- ----- ------- -------Funded status of the plans 40 28 (133) (55)Unrecognized net (gain) loss (42) 98 (9) 15Unrecognized prior service benefit (2) (2) (75) (111)
======= ===== ======= =======Rate assumptionsDiscount rate 7.8% 7.5% 7.8% 7.5%Rate of return on plans' assets 10.0% 9.5% 10.0% 9.5%Salary increases 5.6% 5.8% N/A n/aAnnual increase in cost of benefits N/A n/a 7.0% 7.0%
</TABLE>
The annual increase in cost of postretirement benefits of 7% is assumed todecrease .3ppts per year until stabilizing at 5.5%. An increase in the assumedbenefits cost trend of 1ppt for each year would increase the postretirementbenefit obligation at September 30, 1996 by $55 million.
The Company's accumulated pension benefit obligation at September 30, 1996was $1.2 billion, of which 98% was vested. The projected benefit obligationfor the postretirement benefit plans at September 30, 1996 comprised 47%retirees, 18% fully eligible active participants and 35% other activeparticipants.
The income statement cost of the pension plans for 1996, 1995 and 1994totaled $58, $33 and $37 million, respectively. The income statement cost(credit) for the postretirement benefit plans for the same years was $(16),$(43) and $14 million, respectively. The discount rates and the salary
increase rate were 8.5% and 6.3%, respectively, in 1994.
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8 Stockholders' Equity
<TABLE><CAPTION>
Common Paid-in Retained(Shares in millions) Shares Stock Capital Earnings---------------------------------------------------------------<S> <C> <C> <C> <C>Balance at September 30, 1993 565 $14 $ 862 $4,833Exercise of stock options, net 2 -- 69 --Dividends ($.2875 per share) -- -- -- (153)Net income -- -- -- 1,110
--- --- ------ ------Balance at September 30, 1994 567 14 931 5,790Exercise of stock options, net 8 -- 281 --Dividends ($.345 per share) -- -- -- (180)Net income -- -- -- 1,380
--- --- ------ ------Balance at September 30, 1995 575 14 1,212 6,990Acquisition impact (see Note 2) 104 (7) 7,213 --Exercise of stock options, net 3 -- 144 --Dividends ($.42 per share) -- -- -- (271)Net income -- -- -- 1,214
--- --- ------ ------Balance at September 30, 1996 682 $ 7 $8,569 $7,933
=== === ====== ======</TABLE>
In November 1995, the Company adopted a stockholders' rights plan onsubstantially the same terms originally adopted by the Company in 1989. Theplan becomes operative in certain events involving the acquisition of 25% ormore of the Company's common stock by any person or group in a transaction notapproved by the Company's Board of Directors. Upon the occurrence of such anevent, each right, unless redeemed by the Board, entitles its holder topurchase for $350 an amount of common stock of the Company, or in certaincircumstances the acquirer, having a market value of twice the purchase price.In connection with the rights plan, 7 million shares of preferred stock werereserved. In connection with the acquisition of ABC, the Company's formerstockholders' rights plan was canceled.
At September 30, 1996 and 1995, the Company's cumulative foreign currencytranslation adjustments and other amounts recorded directly to equity were $39and $38 million, net of deferred taxes of $16 and $18 million, respectively.
The Company attempts to increase the long-term value of its shares byperiodically acquiring its stock when it perceives that the market value isbelow an appropriate ratio of share price to historical earnings, projectedearnings, or other relevant measures. Treasury stock activity for the threeyears ended September 30, 1996 was as follows:
Treasury(Shares in millions) Shares Stock------------------------------------------------------------<S> <C> <C>Balance at September 30, 1993 29 $ 715Common stock repurchased 14 571
--- -------Balance at September 30, 1994 43 1,286Common stock repurchased, net 8 317
--- -------Balance at September 30, 1995 51 1,603Cancellation of treasury stock (see Note 2) (51) (1,603)Common stock repurchased 8 462
--- -------Balance at September 30, 1996 8 $ 462
=== =======</TABLE>
On April 22, 1996, the Company adopted a new share repurchase program. Theprogram will allow the Company to purchase up to 105 million shares of itscommon stock from time to time in the open market or in privately negotiatedtransactions. In December 1996, the Company established a fund pursuant to therepurchase program to acquire shares of the Company for the purpose of fundingcertain stock-based compensation. Any shares acquired by the fund that are notutilized must be disposed of by December 31, 1999. Concurrent with theacquisition of ABC, the Company canceled its former share repurchase program.
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9 Stock Incentive Plans
Under various plans, the Company may grant stock option and other awards tokey executive, management and creative personnel. Transactions under thevarious stock option and incentive plans for the periods indicated were asfollows:
<TABLE><CAPTION>(Shares in millions) 1996 1995 1994--------------------------------------------------<S> <C> <C> <C>Outstanding at beginning of year 35 39 36Awards canceled (2) (4) (1)Awards granted 21 8 6Awards exercised (3) (8) (2)Awards transferred (ABC) 1 -- --
Stock option awards are granted at prices equal to at least market price onthe date of grant. Options outstanding at September 30, 1996 and 1995 rangedin price from $13.28 to $65.75 and $5.56 to $57.44 per share, respectively.Options exercised ranged in price from $5.56 to $57.44 per share in 1996, from$3.61 to $57.44 per share in 1995, and from $3.23 to $41.00 per share in 1994.Shares available for future option grants at September 30, 1996 were 60million.
In October 1995, the Financial Accounting Standards Board issued SFAS 123,Accounting for Stock-Based Compensation ("SFAS 123") which is effective forthe Company in fiscal 1997. As permitted under SFAS 123, the Company haselected not to adopt the fair value based method of accounting for its stock-based compensation plans, but will continue to account for such compensationunder the provisions of APB Opinion No. 25 and, accordingly, the impact ofSFAS 123 on the Company's financial statements is not expected to be material.The Company will comply with the disclosure requirements of SFAS 123 in 1997.
10 Detail of Certain Balance Sheet Accounts
<TABLE><CAPTION>
1996 1995---------------------------------------------------------------<S> <C> <C>ReceivablesTrade, net of allowances $ 2,875 $1,593Other 468 200
------- ------$ 3,343 $1,793======= ======
Accounts Payable and Other Accrued LiabilitiesAccounts payable $ 5,515 $2,131Payroll and employee benefits 757 647Other 102 65
------- ------$ 6,374 $2,843======= ======
Intangible AssetsCost in excess of ABC's net assets acquired $16,079 $ --Trademark 1,100 --FCC licenses 1,100 --Accumulated amortization (301) --
During the second quarter of the current year, the Company implemented SFAS121. This new accounting standard changes the method that companies use toevaluate the carrying value of such assets by, among other things, requiringcompanies to evaluate assets at the lowest level at which identifiable cashflows can be determined. The implementation of SFAS 121 resulted in theCompany recognizing a $300 million non-cash charge related principally tocertain assets included in the Theme Parks and Resorts segment.
12 Financial Instruments
InvestmentsAs of September 30, 1996, the Company held $41 million of securities
classified as available-for-sale. As of September 30, 1995, the Company held$96 million of securities classified as trading and $403 and $307 million ofsecurities and cash equivalents, respectively, classified as available-for-sale. In 1996 and 1995, realized gains and losses on available-for-salesecurities, determined principally on an average cost basis, and unrealized
gains and losses on available-for-sale securities were not material. In 1995,the change in the net unrealized gain on trading securities was not material.
Financial Risk ManagementThe Company is exposed to the impact of interest rate changes. The Company's
objective is to manage the impact of interest rate changes on earnings andcash flows and on the market value of its investments and borrowings. TheCompany maintains fixed rate debt as a percentage of its net debt between aminimum and maximum percentage, which is set by policy.
The Company transacts business in virtually every part of the world and issubject to risks associated with changing foreign exchange rates. TheCompany's objective is to reduce earnings and cash flow volatility associatedwith foreign exchange rate changes to allow management to focus its attentionon its core business issues and challenges. Accordingly, the Company entersinto various contracts which change in value as foreign exchange rates changeto protect the value of its existing foreign currency assets and liabilities,commitments and anticipated foreign currency revenues. By
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policy, the Company maintains hedge coverage between minimum and maximumpercentages of its anticipated foreign exchange exposures for each of the nextfive years. The gains and losses on these contracts offset changes in thevalue of the related exposures.
It is the Company's policy to enter into foreign currency and interest ratetransactions only to the extent considered necessary to meet its objectives asstated above. The Company does not enter into foreign currency or interestrate transactions for speculative purposes.
Interest Rate Risk ManagementThe Company uses interest rate swaps and other instruments to manage net
exposure to interest rate changes related to its portfolio of borrowings andinvestments and to lower its overall borrowing costs. Significant interestrate risk management instruments held by the Company at September 30, 1996 and1995 are described below.
Interest Rate Risk Management--BorrowingsAt September 30, 1996, the Company had outstanding interest rate swaps on
its borrowings with notional amounts totaling $900 million, which effectivelyconverted floating rate commercial paper to fixed rate instruments. AtSeptember 30, 1996 and 1995, the Company had outstanding interest rate swapson its borrowings with notional amounts totaling $1,520 and $685 million,respectively, which effectively converted medium-term notes to commercialpaper or LIBOR-based variable rate instruments. These swap agreements expirein two to 15 years.
Interest Rate Risk Management--Investment TransactionsAt September 30, 1995, the Company had outstanding $154 million notional
amount of interest rate swaps designated as hedges of investments, and $225million of options, futures and forward contracts. These swaps and contractswere terminated during 1996 and the realized gains and losses are included in
The impact of interest rate risk management activities on income in 1996 and1995 and the amount of deferred gains and losses from interest rate riskmanagement transactions at September 30, 1996 and 1995 were not material.
Foreign Exchange Risk ManagementThe Company primarily uses option strategies which provide for the sale of
foreign currencies to hedge probable, but not firmly committed, revenues.While these hedging instruments are subject to fluctuations in value, suchfluctuations are offset by changes in the value of the underlying exposuresbeing hedged. The principal currencies hedged are the Japanese yen, Frenchfranc, German mark, British pound, Canadian dollar, Italian lira and Spanishpeseta.
Foreign Exchange Risk Management TransactionsThe Company uses option contracts to hedge anticipated foreign currency
revenues. The Company also uses forward contracts to hedge foreign currencyassets, liabilities and foreign currency payments the Company is committed tomake in connection with the construction of two cruise ships (see Note 13).Cross-currency swaps are used to hedge foreign currency-denominatedborrowings.
At September 30, 1996 and 1995, the notional amounts of the Company'sforeign exchange risk management contracts, net of notional amounts ofcontracts with counterparties against which the Company has a legal right ofoffset, the related exposures hedged and the contract maturities are asfollows:
Gains and losses on contracts hedging anticipated foreign currency revenuesand foreign currency commitments are deferred until such revenues arerecognized or such commitments are met, and offset changes in the value of theforeign currency revenues and commitments. At September 30, 1996 and 1995, theCompany had net deferred gains of $28 million and net deferred losses of $189million, respectively, related to foreign currency hedge transactions, whichwill be recognized in income over the next three years. Amounts recognizablein any one year are not material and will be substantially offset by gains andlosses in the value of the related hedged transactions.
The impact of foreign exchange risk management activities on income in 1996and 1995 was not material.
Fair Value of Financial InstrumentsAt September 30, 1996 and 1995, the Company's financial instruments included
sold under agreements to repurchase approximated carrying values because ofthe short-term nature of these instruments. The estimated fair values of otherfinancial instruments subject to fair value disclosures, determined based onbroker quotes or quoted market prices or rates for the same or similarinstruments, and the related carrying amounts are as follows:
<TABLE><CAPTION>
1996 1995------------------- -----------------CARRYING FAIR Carrying FairAMOUNT VALUE Amount Value
Credit ConcentrationsThe Company continually monitors its positions with, and the credit quality
of, the financial institutions which are counterparties to its financialinstruments and does not anticipate nonperformance by the counterparties. TheCompany would not realize a material loss as of September 30, 1996 in theevent of nonperformance by any one counterparty. The Company enters intotransactions only with financial institution counterparties which have acredit rating of A- or better. The Company's current policy in agreements withfinancial institution counterparties is generally to require collateral in theevent credit ratings fall below A- or in the event aggregate exposures exceedlimits as defined by contract. In addition, the Company limits the amount ofcredit exposure with any one institution. At September 30, 1996, financialinstitution counterparties posted collateral of $201 million to the Company,and the Company was not required to collateralize its financial instrumentobligations.
The Company's trade receivables and investments do not represent significantconcentrations of credit risk at September 30, 1996, due to the wide varietyof customers and markets into which the Company's products are sold, theirdispersion across many geographic areas, and the diversification of theCompany's portfolio among instruments and issuers.
13 Commitments and Contingencies
The Company, together with, in some instances, certain of its directors andofficers, is a defendant or co-defendant in various legal actions involvingcopyright, breach of contract and various other claims incident to the conductof its businesses. Management does not expect the Company to suffer anymaterial liability by reason of such actions, nor does it expect that suchactions will have a material effect on the Company's liquidity or operatingresults.
During 1995, the Company entered into agreements with a shipyard to buildtwo cruise ships for its Disney Cruise Line. Under the agreements, the Companyis committed to make payments totaling approximately $700 million through1999.
At September 30, 1996, the Company is committed to the purchase of broadcastrights for various feature films, sports and other programming aggregatingapproximately $4.5 billion. This amount is substantially payable over the nextfive years.
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QUARTERLY FINANCIAL SUMMARY(In millions, except per share data)
(Unaudited)
<TABLE><CAPTION>
December 31 March 31 June 30 September 30--------------------------------------------------------------------------<S> <C> <C> <C> <C>1996 (/1/)Revenues $3,837 $4,543 $5,087 $5,272Operating income (/2/) 863 356 956 858Net income (loss) (/2/) 497 (25) 406 336Earnings (loss) per share (/2/) .93 (.04) .59 .491995Revenues $3,303 $2,951 $2,773 $3,124Operating income 787 608 574 497Net income 482 315 318 265Earnings per share .91 .60 .60 .50</TABLE>--------(1) Results after February 9, 1996 reflect the impact of the acquisition of
ABC. See Note 2 to the Consolidated Financial Statements.(2) Reflects a $300 million non-cash charge in the second quarter pertaining
to the implementation of SFAS 121, and a $225 million charge for costsrelated to the acquisition of ABC. The earnings per share impacts of thesecharges were $.30 and $.22, respectively. See Notes 2 and 11 to theConsolidated Financial Statements.
Section 1. Registered Office. The registered office of the--------- -----------------
Corporation shall be in the City of Wilmington, County of New Castle, Delaware.
Section 2. Principal Place of Business. The principal place of--------- ---------------------------
business of the Corporation is hereby fixed and located at 500 South Buena VistaStreet, Burbank, California 91521.
Section 3. Other Offices. The Corporation may also have offices at--------- -------------
such other places both within and without the State of Delaware as the Board ofDirectors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS------------------------
Section 1. Place of Meetings. Meetings of the stockholders for the--------- -----------------
election of directors or for any other purpose shall be held at such time andplace, either within or without the State of Delaware, as shall be designatedfrom time to time by the Board of Directors (and in the case of a specialmeeting, by the Board of Directors or the person calling the special meeting asauthorized by Section 3 of this Article II) and stated in the notice of themeeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of Stockholders
--------- ---------------shall be held on such date and at such time and place as may be fixed by theBoard of Directors and stated in the notice of the meeting, for the purpose ofelecting directors and for the transaction of such other business as is properlybrought before the meeting in accordance with these Bylaws.
To be properly brought before the Annual Meeting, business must beeither (i) specified in the notice of Annual Meeting (or any supplement oramendment thereto) given by or at the direction of the Board of Directors, (ii)otherwise brought before the Annual Meeting by or at the direction of the Boardof Directors, or (iii) otherwise (a) properly be requested to be brought beforethe Annual Meeting by a stockholder of record entitled to vote in the electionof directors generally, and (b) constitute a proper subject to be brought beforesuch meeting. In addition to any other applicable requirements, for business tobe properly brought before an Annual Meeting by a stockholder, the stockholdermust have given timely notice thereof in writing to the Secretary of theCorporation. To be timely, a stockholder's notice must be delivered to ormailed and received at 500 South Buena Vista Street, Burbank, California 91521,not less than 50 days nor more than 75 days prior to the meeting; provided,however, that in the event that less than 65 days' notice or prior publicdisclosure of the date of the Annual Meeting is given or made to stockholders,notice by a stockholder to be timely must be so received not later than theclose of business on the 12th day following the day on which such notice of thedate of the Annual Meeting was mailed or such public disclosure was made,whichever first occurs. A stockholder's notice to the Secretary shall set forthas to each matter the stockholder proposes to bring before the Annual Meeting(i) a brief description of the business desired to be brought before the Annual
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Meeting and the reasons for conducting such business at the Annual Meeting, (ii)the name and record address of the stockholder proposing such business, (iii)the class, series and number of shares of the Corporation which are beneficiallyowned by the stockholder, and (iv) any material interest of the stockholder insuch business. Notwithstanding anything in the Bylaws to the contrary, nobusiness shall be conducted at the Annual Meeting except in accordance with theprocedures set forth in this Article II, Section 2. The person presiding at anAnnual Meeting shall, if the facts warrant, determine and declare to the AnnualMeeting that business was not properly brought before the Annual Meeting inaccordance with the provisions of this Article II, Section 2, and if he shouldso determine, he shall so declare to the Annual Meeting and any such businessnot properly brought before the meeting shall not be transacted. Written noticeof the Annual Meeting stating the place, date and hour of the Annual Meetingshall be given to each stockholder entitled to vote at such meeting not lessthan 10 nor more than 60 days before the date of the meeting.
Section 3. Special Meetings. Special meetings of stockholders, for--------- ----------------
any purpose or purposes, may be called by the Board of Directors, the Chairmanof the Board of Directors, or the President. Special meetings of stockholders
may not be called by any other person or persons. Written notice of a specialmeeting stating the place, date and hour of the meeting and the purpose orpurposes for which the meeting is called shall be given not less than 10 normore than 60 days before the date of the meeting to each stockholder entitled tovote at such meeting, and only such business as is stated in such notice shallbe acted upon thereat. Nominations of persons for election to the Board ofDirectors may be made at a special meeting of stockholders at which directorsare to be elected pursuant to the Corporation's notice of meeting (a) by or atthe direction of the Board of Directors, or (b) by a stockholder of theCorporation who is entitled to vote at the meeting and who complies with thenotice provisions contained in Section 2 of this Article II.
Section 4. Quorum. Except as may be otherwise provided by law or by--------- ------
the Certificate of Incorporation, the holders of a majority of the capital stockissued and outstanding and entitled to vote thereat, present in person orrepresented by proxy, shall constitute a quorum at all meetings of thestockholders for the transaction of business. If, however, such quorum shall notbe present or represented at any meeting of the stockholders, a minority of thestockholders entitled to vote thereat, present in person or represented byproxy, shall have power to adjourn the meeting from time to time, without noticeother than announcement at the meeting, until a quorum shall be present orrepresented. At such adjourned meeting at which a quorum shall be present orrepresented, any business may be transacted which might have been transacted atthe meeting as originally noticed. If the adjournment is for more than 30 days,or if after the adjournment a new record date is fixed for the adjournedmeeting, a notice of the adjourned meeting shall be given to each stockholderentitled to vote at the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate--------- ------
of Incorporation or these Bylaws, (i) at all meetings of stockholders for theelection of directors, a plurality of votes cast shall be sufficient to elect,and (ii) any other question brought before any meeting of stockholders shall bedecided by the vote of the holders of a majority of the stock represented andentitled to vote thereon. Unless otherwise provided in the Certificate ofIncorporation, each stockholder represented at a meeting of stockholders shallbe entitled to cast one vote for each share of the capital stock entitled tovote thereat held by such stockholder. The Board of Directors, in itsdiscretion, or the officer of the Corporation presiding at a meeting ofstockholders, in his discretion, may require that any votes cast at such meetingshall be cast by written ballot.
Section 6. Organization. All meetings of the stockholders shall be--------- ------------
presided over by the Chairman of the Board of Directors or, if he is notpresent, by the Vice Chairman of the Board of Directors, and if he is notpresent, by such officer or director as is designated by the Board of Directors.The Secretary of the Corporation or, if he is not present, any AssistantSecretary or other person designated by the presiding officer shall act assecretary of the meeting.
Section 7. List of Stockholders Entitled to Vote. The officer of the--------- -------------------------------------
Corporation who has charge of the stock ledger of the Corporation shall prepareand make, at least 10 days before every meeting of stockholders, a complete listof the stockholders entitled to vote at the meeting, arranged in alphabeticalorder, and showing the address of each stockholder and the number of sharesregistered in the name of each stockholder. Such list shall be open to theexamination of any stockholder, for any purpose germane to the meeting, duringordinary business hours, for a period of at least 10 days prior to the meeting,either at a place within the city where the meeting is to be held, which placeshall be specified in the notice of the meeting, or, if not so specified, at theplace where the meeting is to be held. The list shall also be produced and keptat the time and place of the meeting during the whole time thereof, and may beinspected by any stockholder of the Corporation who is present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall--------- ------------
be the only evidence as to who are the stockholders entitled to examine thestock ledger, the list required by Section 7 of this Article II or the books ofthe Corporation, or to vote in person or by proxy at any meeting ofstockholders.
Section 9. Inspectors of Election. Before any meeting of--------- ----------------------
stockholders, the Board of Directors shall appoint one or more inspectors to actat the meeting and make a written report thereof. The Board of Directors maydesignate one or more persons as alternate inspectors to replace any inspectorwho fails to act. If no inspector or alternate is able to act at a meeting ofstockholders, the person presiding at the meeting shall appoint one or moreinspectors to act at the meeting. Each inspector, before entering upon thedischarge of his duties, shall take and sign an oath faithfully to execute theduties of inspector with strict impartiality and according to the best of hisability.
The inspectors shall:
(a) ascertain the number of shares outstanding and the votingpower of each,
(b) determine the shares represented at the meeting and thevalidity of proxies and ballots,
(c) count all votes and ballots,
(d) determine and retain for a reasonable period a record of thedisposition of any challenges made to any determination made by the inspectors,and
(e) certify their determination of the number of sharesrepresented at the meeting, and their count of all votes and ballots.
The inspectors may appoint or retain other persons or entities toassist the inspectors in the performance of the duties of the inspectors. Indetermining the validity and counting of proxies and ballots, the inspectorsshall act in accordance with applicable law.
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ARTICLE III
DIRECTORS---------
Section 1. Number and Election of Directors. Subject to the rights,--------- --------------------------------
if any, of holders of preferred stock of the Corporation to elect directors ofthe Corporation, the Board of Directors shall consist of not less than nine normore than 21 members with the exact number of directors to be determined fromtime to time solely by resolution duly adopted by the Board of Directors.Directors shall be elected by a plurality of the votes cast at Annual Meetingsof stockholders, and each director so elected shall hold office as provided byArticle FIFTH of the Certificate of Incorporation. A director may be removedfrom office only as provided by Article SIXTH of the Certificate ofIncorporation. Any director may resign at any time effective upon givingwritten notice to the Corporation, unless the notice specifies a later time forthe effectiveness of such resignation. Directors need not be stockholders.
Section 2. Nomination of Directors. Only persons who are nominated--------- -----------------------
in accordance with the following procedures shall be eligible for election asdirectors. Nominations of persons for election to the Board of Directors of theCorporation at the Annual Meeting may be made at such meeting by or at thedirection of the Board of Directors, by any committee or persons appointed bythe Board of Directors or by any stockholder of the Corporation entitled to votefor the election of directors at the meeting who complies with the noticeprocedures set forth in this Article III, Section 2. Such nominations by anystockholder shall be made pursuant to timely notice in writing to the Secretaryof the Corporation. To be timely, a stockholder's notice shall be delivered toor mailed and received at the principal executive offices of the Corporation notless than 50 days nor more than 75 days prior to the meeting; provided, however,that in the event that less than 65 days' notice or prior public disclosure ofthe date of the meeting is given or made to stockholders, notice by thestockholder to be timely must be so received not later than the close ofbusiness on the 15th day following the day on which such notice of the date ofthe meeting was mailed or such public disclosure was made, whichever firstoccurs. Such stockholder's notice to the Secretary shall set forth (i) as toeach person whom the stockholder proposes to nominate for election or reelection
as a director, (a) the name, age, business address and residence address of theperson, (b) the principal occupation or employment of the person, (c) the classand number of shares of capital stock of the Corporation which are beneficiallyowned by the person, and (d) any other information relating to the person thatis required to be disclosed in solicitations for proxies for election ofdirectors pursuant to the Rules and Regulations of the Securities and ExchangeCommission under Section 14 of the Securities Exchange Act of 1934, as amended;and (ii) as to the stockholder giving the notice (a) the name and record addressof the stockholder and (b) the class and number of shares of capital stock ofthe Corporation which are beneficially owned by the stockholder. TheCorporation may require any proposed nominee to furnish such other informationas may reasonably be required by the Corporation to determine the eligibility ofsuch proposed nominee to serve as a director of the Corporation. No personshall be eligible for election as a director of the Corporation unless nominatedin accordance with the procedures set forth herein. The officer of theCorporation presiding at an Annual Meeting shall, if the facts warrant,determine and declare to the meeting that a nomination was not made inaccordance with the foregoing procedure, and if he should so determine, he shallso declare to the meeting and the defective nomination shall be disregarded.
Section 3. Vacancies. Any vacancy on the Board of Directors,--------- ---------
howsoever resulting, may be filled by a majority of the directors then inoffice, even if less than a quorum, or by a sole remaining director. Anydirector elected to fill a vacancy shall hold office for a term that shallcoincide with the term of the class to which such director shall have beenelected.
Section 4. Duties and Powers. The business of the Corporation shall--------- -----------------
be managed by or under the direction of the Board of Directors which mayexercise all such powers of the Corporation and do all such lawful acts andthings as are not by statute or by the Certificate of Incorporation or by theseBylaws directed or required to be exercised or done by the stockholders.
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Section 5. Meetings. The Board of Directors of the Corporation may--------- --------
hold meetings, both regular and special, either within or without the State ofDelaware. Regular meetings of the Board of Directors may be held without noticeat such time and at such place as may from time to time be determined by theBoard of Directors. Special meetings of the Board of Directors may be called bythe Chairman of the Board of Directors, the President, or by a majority of theBoard of Directors. Notice thereof, stating the place, date and hour of themeeting, shall be given to each director either by mail not less than four daysbefore the date of the meeting, or personally or by telephone, telegram, telexor similar means of communication on 12 hours notice, or on such shorter noticeas the person or persons calling such meeting may deem necessary or appropriatein the circumstances.
Section 6. Quorum; Action of Board of Directors. Except as may be--------- ------------------------------------
otherwise specifically provided by law, the Certificate of Incorporation orthese Bylaws, at all meetings of the Board of Directors, a majority of theentire Board of Directors shall constitute a quorum for the transaction ofbusiness and the act of a majority of the directors present at any meeting atwhich there is a quorum shall be the act of the Board of Directors. If a quorumshall not be present at any meeting of the Board of Directors, the directorspresent thereat may adjourn the meeting from time to time, without notice otherthan announcement at the meeting, until a quorum shall be present.
Section 7. Action by Written Consent. Any action required or--------- -------------------------
permitted to be taken at any meeting of the Board of Directors or of anycommittee thereof may be taken without a meeting, if all the members of theBoard of Directors or committee, as the case may be, consent thereto in writing,and the writing or writings are filed with the minutes of proceedings of theBoard of Directors or committee.
Section 8. Meetings by Means of Conference Telephone. Members of the--------- -----------------------------------------
Board of Directors of the Corporation, or any committee designated by the Boardof Directors, may participate in a meeting of the Board of Directors or suchcommittee by means of a conference telephone or similar communications equipmentby means of which all persons participating in the meeting can hear each other,and participation in a meeting pursuant to this Section 8 shall constitutepresence in person at such meeting.
Section 9. Committees. The Board of Directors may, by resolution--------- ----------
passed by a majority of the whole Board of Directors, designate one or morecommittees, each committee to consist of one or more of the directors of theCorporation. The Board of Directors may designate one or more directors asalternate members of any committee, who may replace any absent or disqualifiedmember at any meeting of any such committee. In the absence or disqualificationof a member of a committee, and in the absence of a designation by the Board ofDirectors of an alternate member to replace the absent or disqualified member,the member or members thereof present at any meeting and not disqualified fromvoting, whether or not he or they constitute a quorum, may unanimously appointanother member of the Board of Directors to act at the meeting in the place ofany absent or disqualified member. Any committee, to the extent allowed by lawand provided in the resolution establishing such committee, shall have and mayexercise all the powers and authority of the Board of Directors in themanagement of the business and affairs of the Corporation. The Board ofDirectors shall have the power to prescribe the manner in which proceedings ofany such committee shall be conducted. In the absence of any such prescription,such committee shall have the power to prescribe the manner in which itsproceedings shall be conducted. Unless the Board of Directors or such committeeshall otherwise provide, regular and special meetings and other actions of anysuch committee shall be governed by the provisions of this Article III
applicable to meetings and actions of the Board of Directors. Each committeeshall keep regular minutes and report to the Board of Directors when required.
Section 10. Fees and Compensation. Directors and members of committees---------- ---------------------
may receive such compensation, if any, for their services, and suchreimbursement for expenses, as may be fixed or determined by the Board ofDirectors.
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ARTICLE IV
OFFICERS--------
Section 1. General. The officers of the Corporation shall be chosen--------- -------
by the Board of Directors and shall be a Chairman of the Board of Directors (whomust be a director), a President, a Secretary and a Treasurer. The Board ofDirectors, in its sole discretion, may also choose a Vice Chairman of the Boardof Directors (who must be a director), one or more Executive Vice Presidents,Senior Vice Presidents, Vice Presidents, Assistant Secretaries, AssistantTreasurers and other officers. Any number of offices may be held by the sameperson, unless otherwise prohibited by law, the Certificate of Incorporation orthese Bylaws.
Section 2. Election. The Board of Directors at its first meeting--------- --------
held after each Annual Meeting of stockholders shall elect the officers of theCorporation who shall hold their offices for such terms and shall exercise suchpowers and perform such duties as shall be determined from time to time solelyby the Board of Directors, which determination may be by resolution of the Boardof Directors or in any bylaw provision duly adopted or approved by the Board ofDirectors; and all officers of the Corporation shall hold office until theirsuccessors are chosen and qualified, or until their earlier resignation orremoval. Any officer elected by the Board of Directors may be removed at anytime by the Board of Directors with or without cause. Any vacancy occurring inany office of the Corporation may be filled only by the Board of Directors.
Section 3. Chairman of the Board of Directors. The Chairman of the--------- ----------------------------------
Board of Directors shall be the Chief Executive Officer of the Corporation,shall preside at all meetings of the Board of Directors and of stockholders andshall, subject to the provisions of the Bylaws and the control of the Board ofDirectors, have general and active management, direction, and supervision overthe business of the Corporation and over its officers. He shall be a member ex
--officio of all committees created by the Board of Directors, excluding the Audit-------
Review Committee and any committee to which he has been designated a regularmember by the Board of Directors. He shall perform all duties incident to theoffice of chief executive and such other duties as from time to time may beassigned to him by the Board of Directors. He shall have the right to delegateany of his powers to any other officer or employee.
Section 4. President. The President shall report and be responsible--------- ---------
to the Chairman of the Board. The President shall have such powers and performsuch duties as from time to time may be assigned or delegated to him by theBoard of Directors or are incident to the office or President.
During the absence, disability, or at the request of the Chairman ofthe Board of Directors, the President shall perform the duties and exercise thepowers of the Chairman of the Board of Directors. In the absence or disabilityof both the President and the Chairman of the Board of Directors, the persondesignated by the Board of Directors shall perform the duties and exercise thepowers of the President, and unless otherwise determined by the Board, theduties and powers of the Chairman.
Section 5. Executive Vice Presidents. The Executive Vice Presidents--------- -------------------------
shall have such powers and perform such duties as from time to time may beprescribed for them respectively by the Board of Directors or are incident tothe office of Executive Vice President.
have such powers and perform such duties as from time to time may be prescribedfor them respectively by the Board of Directors or are incident to the office ofSenior Vice President.
Section 7. Vice Presidents. The Vice Presidents shall have such--------- ---------------
powers and perform such duties as from time to time may be prescribed for themrespectively by the Board of Directors or are incident to the office of VicePresident.
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Section 8. Secretary. The Secretary shall keep or cause to be kept,--------- ---------
at the principal executive office or such other place as the Board of Directorsmay order, a book of minutes of all meetings of stockholders, the Board ofDirectors and its committees, with the time and place of holding, whetherregular or special, and if special, how authorized, the notice thereof given,the names of those present at Board of Directors and committee meetings, thenumber of shares present or represented at stockholders' meetings, and theproceedings thereof. The Secretary shall keep, or cause to be kept, a copy ofthe Bylaws of the Corporation at the principal executive office or business
The Secretary shall keep, or cause to be kept, at the principalexecutive office or at the office of the Corporation's transfer agent orregistrar, if one be appointed, a stock register, or a duplicate stock register,showing the names of the stockholders and their addresses, the number andclasses of shares held by each, the number and date of certificates issued forthe same, and the number and date of cancellation of every certificatesurrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetingsof the stockholders and of the Board of Directors and any committees thereofrequired by these Bylaws or by law to be given, shall keep the seal of theCorporation in safe custody, and shall have such other powers and perform suchother duties as may be prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall have the custody of the--------- ---------
corporate funds and securities of the Corporation and shall keep and maintain,or cause to be kept and maintained, adequate and correct accounts of theproperties and business transactions of the Corporation, and shall send or causeto be sent to the stockholders of the Corporation such financial statements andreports as are by law or these Bylaws required to be sent to them.
The Treasurer shall deposit all moneys and valuables in the name andto the credit of the Corporation with such depositaries as may be designated bythe Board of Directors. The Treasurer shall disburse the funds of theCorporation as may be ordered by the Board of Directors, shall render to thePresident and directors, whenever they request it, an account of alltransactions and of the financial condition of the Corporation, and shall havesuch other powers and perform such other duties as may be prescribed by theBoard of Directors.
Section 10. Other Officers. Such other officers or assistant---------- --------------
officers as the Board of Directors may choose shall perform such duties and havesuch powers as from time to time may be assigned to them by the Board ofDirectors. The Board of Directors may delegate to any other officer of theCorporation the power to choose such other officers and to prescribe theirrespective duties and powers.
Section 11. Execution of Contracts and Other Documents. Each officer---------- ------------------------------------------
of the Corporation may execute, affix the corporate seal and/or deliver, in thename and on behalf of the Corporation, deeds, mortgages, notes, bonds,contracts, agreements, powers of attorney, guarantees, settlements, releases,evidences of indebtedness, conveyances, or any other document or instrumentwhich is authorized by the Board of Directors or is required to be executed inthe ordinary course of business, except in cases where the execution, affixationof the corporate seal and/or delivery thereof shall be expressly and exclusivelydelegated by the Board of Directors to some other officer or agent of the
Section 1. Form of Certificates. Every holder of stock in the--------- --------------------
Corporation shall be entitled to have a certificate signed, in the name of theCorporation (i) by the Chairman or Vice Chairman of the Board of Directors, thePresident or any Executive Vice President, Senior Vice President or VicePresident and (ii) by the Treasurer or an Assistant Treasurer or the Secretaryor an Assistant Secretary of the Corporation, certifying the number of sharesowned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a--------- ----------
transfer agent or (ii) a registrar, any other signature on the certificate maybe a facsimile. In case any officer, transfer agent or registrar who has signedor whose facsimile signature has been placed upon a certificate shall haveceased to be such officer, transfer agent or registrar before such certificateis issued, it may be issued by the Corporation with the same effect as if hewere such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a--------- -----------------
new certificate to be issued in place of any certificate theretofore issued bythe Corporation alleged to have been lost, stolen or destroyed, upon the makingof an affidavit of that fact by the person claiming the certificate of stock tobe lost, stolen or destroyed. When authorizing such issue of a new certificate,the Board of Directors may, in its discretion and as a condition precedent tothe issuance thereof, require the owner of such lost, stolen or destroyedcertificate, or his legal representative, to advertise the same in such manneras the Board of Directors shall require and/or to give the Corporation a bond insuch sum as it may direct as indemnity against any claim that may be madeagainst the Corporation with respect to the certificate alleged to have beenlost, stolen or destroyed.
Section 4. Transfers. Transfers of shares of capital stock of the--------- ---------
Corporation shall be made only on the stock record of the Corporation by theholder of record thereof or by his attorney thereunto authorized by the power ofattorney duly executed and filed with the Secretary of the Corporation or thetransfer agent thereof, and only on surrender of the certificate or certificatesrepresenting such shares, properly endorsed or accompanied by a duly executedstock transfer power. The Board of Directors may make such additional rules andregulations as it may deem expedient concerning the issue and transfer of
certificates representing shares of the capital stock of the Corporation.
Section 5. Record Date. In order that the Corporation may determine--------- -----------
the stockholders entitled to notice of or to vote at any meeting of stockholdersor any adjournment thereof, or entitled to receive payment of any dividend orother distribution or allotment of any rights, or entitled to exercise anyrights in respect of any change, conversion or exchange of stock, or for thepurpose of any other lawful action, the Board of Directors may fix, in advance,a record date, which shall not be more than 60 days nor less than 10 days beforethe date of such meeting, nor more than 60 days prior to any other action. Adetermination of stockholders of record entitled to notice of or to vote at ameeting of stockholders shall apply to any adjournment of the meeting; provided,however, that the Board of Directors may fix a new record date for the adjournedmeeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to--------- -----------------
recognize the exclusive right of a person registered on its books as the ownerof shares to receive dividends, and to vote as such owner, and to hold liablefor calls and assessments a person registered on its books as the owner ofshares, and shall not be bound to recognize any equitable or other claim to orinterest in such share or shares on the part of any other person, whether or notit shall have express or other notice thereof, except as otherwise provided bylaw.
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ARTICLE VI
NOTICES-------
Section 1. Notices. Whenever written notice is required by law, the--------- -------
Certificate of Incorporation or these Bylaws, to be given to any director orstockholder, such notice may be given by mail, addressed to such director orstockholder, at his address as it appears on the records of the Corporation,with postage thereon prepaid, and such notice shall be deemed to be given at thetime when the same shall be deposited in the United States mail. Written noticemay also be given personally or by telegram, telex, cable or facsimiletransmission followed, if required by law, by deposit in the United States mail,with postage prepaid.
Section 2. Waivers of Notice. Whenever any notice is required by--------- -----------------
law, the Certificate of Incorporation or these Bylaws, to be given to anydirector or stockholder, a waiver thereof in writing, signed by the person orpersons entitled to said notice, whether before or after the time statedtherein, shall be deemed equivalent thereto.
Section 1. Disbursements. All checks or demands for money and notes--------- -------------
of the Corporation shall be signed by such officer or officers or such otherperson or persons as the Board of Directors may from time to time designate.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be--------- -----------
fixed by resolution of the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of--------- ------------------------------------------
attorney, proxies, waivers of notice of meeting, consents and other instrumentsrelating to securities owned by the Corporation may be executed in the name ofand on behalf of the Corporation by the Chairman of the Board of Directors orthe President or any other officer or officers authorized by the Board ofDirectors, the Chairman of the Board of Directors or the President, and any suchofficer may, in the name of and on behalf of the Corporation, vote, representand exercise on behalf of the Corporation all rights incident to any and allshares of any other corporation or corporations standing in the name of theCorporation and take all such action as any such officer may deem advisable tovote in person or by proxy at any meeting of security holders of any corporationin which the Corporation may own securities and at any such meeting shallpossess and may exercise any and all rights and power incident to the ownershipof such securities and which, as the owner thereof, the Corporation might haveexercised and possessed if present. The Board of Directors may, by resolution,from time to time confer like powers upon any other person or persons.
ARTICLE VIII
INDEMNIFICATION---------------
Section 1. General. The Corporation shall indemnify to the full--------- -------
extent authorized or permitted by law (as now or hereafter in effect) any personmade, or threatened to be made, a defendant or witness to any action, suit orproceeding (whether civil or criminal or otherwise) by reason of the fact thathe, his testator or intestate, is or was a director or officer of theCorporation or by reason of the fact that such director or officer, at therequest of the Corporation, is or was serving any other corporation,partnership, joint venture, trust, employee benefit plan or other enterprise, inany capacity. Nothing contained herein shall affect any rights toindemnification to which employees other than directors and officers may beentitled by law. No amendment or repeal of this Section 1 shall apply to or haveany effect on any right to indemnification provided hereunder with respect to
any acts or omissions occurring prior to such amendment or repeal.
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Section 2. Further Assurance. In furtherance and not in limitation--------- -----------------
of the powers conferred by statute:
(a) the Corporation may purchase and maintain insurance onbehalf of any person who is or was a director, officer, employee or agent of theCorporation, or is serving at the request of the Corporation as a director,officer, employee or agent of another corporation, partnership, joint venture,trust, employee benefit plan or other enterprise against any liability assertedagainst him and incurred by him in any such capacity, or arising out of hisstatus as such, whether or not the Corporation would have the power to indemnifyhim against such liability under the provisions of law; and
(b) the Corporation may create a trust fund, grant a securityinterest and/or use other means (including, without limitation, letters ofcredit, surety bonds and/or other similar arrangements), as well as enter intocontracts providing indemnification to the full extent authorized or permittedby law and including as part thereof provisions with respect to any or all ofthe foregoing to ensure the payment of such amounts as may become necessary toeffect indemnification as provided therein, or elsewhere.
ARTICLE IX
AMENDMENTS----------
Section 1. General. These Bylaws may be altered, amended or--------- -------
repealed, in whole or in part, or new Bylaws may be adopted by either theholders of 66-2/3% of the outstanding capital stock entitled to vote thereon orby the Board of Directors.
ARTICLE X
EMERGENCY PROVISIONS--------------------
Section 1. General. The provisions of this Article X shall be--------- -------
operative only during a national emergency declared by the President of theUnited States or the person performing the President's functions, or in theevent of a nuclear, atomic or other attack on the United States or a disastermaking it impossible or impracticable for the Corporation to conduct itsbusiness without recourse to the provisions of this Article X. Said provisionsin such event shall override all other Bylaws of the Corporation in conflictwith any provisions of this Article X, and shall remain operative so long as it
remains impossible or impracticable to continue the business of the Corporationotherwise, but thereafter shall be inoperative; provided that all actions takenin good faith pursuant to such provisions shall thereafter remain in full forceand effect unless and until revoked by action taken pursuant to the provisionsof the Bylaws other than those contained in this Article X.
Section 2. Unavailable Directors. All directors of the Corporation--------- ---------------------
who are not available to perform their duties as directors by reason of physicalor mental incapacity or for any other reason or who are unwilling to performtheir duties or whose whereabouts are unknown shall automatically cease to bedirectors, with like effect as if such persons had resigned as directors, solong as such unavailability continues.
Section 3. Authorized Number of Directors. The authorized number of--------- ------------------------------
directors shall be the number of directors remaining after eliminating those whohave ceased to be directors pursuant to Section 2 of this Article X, or theminimum number required by law, whichever number is greater.
Section 4. Quorum. The number of directors necessary to constitute a--------- ------
quorum shall be one-third of the authorized number of directors as specified inSection 3 of this Article X, or such other minimum number as, pursuant to thelaw or lawful decree then in force, it is possible for the Bylaws of aCorporation to specify.
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Section 5. Creation of Emergency Committee. In the event the number--------- -------------------------------
of directors remaining after eliminating those who have ceased to be directorspursuant to Section 2 of this Article X is less than the minimum number ofauthorized directors required by law, then until the appointment of additionaldirectors to make up such required minimum, all the powers and authorities whichthe Board of Directors could by law delegate including all powers andauthorities which the Board of Directors could delegate to a committee, shall beautomatically vested in an emergency committee, and the emergency committeeshall thereafter manage the affairs of the Corporation pursuant to such powersand authorities and shall have all other powers and authorities as may by law orlawful decree be conferred on any person or body of persons during a period ofemergency.
Section 6. Constitution of Emergency Committee. The emergency--------- -----------------------------------
committee shall consist of all the directors remaining after eliminating thosewho have ceased to be directors pursuant to Section 2 of this Article X,provided that such remaining directors are not less than three in number. In theevent such remaining directors are less than three in number, the emergencycommittee shall consist of three persons, who shall be the remaining director or
directors and either one or two officers or employees of the Corporation, as theremaining director or directors may in writing designate. If there is noremaining director, the emergency committee shall consist of the three mostsenior officers of the Corporation who are available to serve, and if and to theextent that officers are not available, the most senior employees of theCorporation. Seniority shall be determined in accordance with any designation ofseniority in the minutes of the proceedings of the Board, and in the absence ofsuch designation, shall be determined by rate of remuneration. In the event thatthere are no remaining directors and no officers or employees of the Corporationavailable, the emergency committee shall consist of three persons designated inwriting by the stockholder owning the largest number of shares of record as ofthe date of the last record date.
Section 7. Powers of Emergency Committee. The emergency committee,--------- -----------------------------
once appointed, shall govern its own procedures and shall have power to increasethe number of members thereof beyond the original number, and in the event of avacancy or vacancies therein, arising at any time, the remaining member ormembers of the emergency committee shall have the power to fill such vacancy orvacancies. In the event at any time after its appointment all members of theemergency committee shall die or resign or become unavailable to act for anyreason whatsoever, a new emergency committee shall be appointed in accordancewith the foregoing provisions of this Article X.
Section 8. Directors Becoming Available. Any person who has ceased--------- ----------------------------
to be a director pursuant to the provisions of Section 2 of this Article X andwho thereafter becomes available to serve as a director shall automaticallybecome a member of the emergency committee.
Section 9. Election of Board of Directors. The emergency committee--------- ------------------------------
shall, as soon after its appointment as is practicable, take all requisiteaction to secure the election of a board of directors, and upon such electionall the powers and authorities of the emergency committee shall cease.
Section 10. Termination of Emergency Committee. In the event, after---------- ----------------------------------
the appointment of an emergency committee, a sufficient number of persons whoceased to be directors pursuant to Section 2 of this Article X become availableto serve as directors, so that if they had not ceased to be directors asaforesaid, there would be enough directors to constitute the minimum number ofdirectors required by law, then all such persons shall automatically be deemedto be reappointed as directors and the powers and authorities of the emergencycommittee shall be at an end.
<C> <S> <C>SECTION 1.01. Certain Defined Terms.................................. 1SECTION 1.02. Computation of Time Periods............................ 10SECTION 1.03. Accounting Terms....................................... 10
ARTICLE IIAMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances........................................... 11SECTION 2.02. Making the Advances.................................... 11SECTION 2.03. Facility Fee........................................... 12SECTION 2.04. Reduction of the Commitments........................... 12SECTION 2.05. Repayment of Advances.................................. 13SECTION 2.06. Interest on Advances................................... 13SECTION 2.07. Additional Interest on Eurodollar Rate Advances........ 14SECTION 2.08. Interest Rate Determination............................ 14SECTION 2.09. Optional Conversion of Advances........................ 15SECTION 2.10. Prepayments of Advances................................ 16SECTION 2.11. Increased Costs........................................ 16SECTION 2.12. Illegality............................................. 17SECTION 2.13. Payments and Computations.............................. 17SECTION 2.14. Taxes.................................................. 18SECTION 2.15. Sharing of Payments, Etc............................... 21SECTION 2.16. Mandatory Assignment by a Lender; Mitigation........... 21SECTION 2.17. Evidence of Debt....................................... 22SECTION 2.18. Use of Proceeds........................................ 22SECTION 2.19. Extension of Termination Date.......................... 22
ARTICLE IIICONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 3.01. Condition Precedent to Effectiveness of Section 2.01... 25SECTION 3.02. Conditions Precedent to Each Borrowing................. 26SECTION 3.03. Determinations Under Section 3.01...................... 26
Exhibit A - Form of Notice of BorrowingExhibit B - Form of Assignment and AcceptanceExhibit C - Form of Opinion of Assistant General Counsel
of the BorrowerExhibit D-1 - Form of Foreign Lender CertificateExhibit D-2 - Form of Foreign Lender Certificate
</TABLE>
(ii)
364-DAY CREDIT AGREEMENT
Dated as of October 30, 1996
THE WALT DISNEY COMPANY, a Delaware corporation (the "Borrower"), thebanks, financial institutions and other institutional lenders (the "InitialLenders") listed on the signature pages hereof under the heading "The InitialLenders", CITICORP USA, INC., a Delaware corporation ("CUSA"), as administrativeagent (together with any successor Administrative Agent appointed pursuant toArticle VII, the "Administrative Agent") for the Lenders (as hereinafterdefined) hereunder, and CREDIT SUISSE, a Swiss banking corporation ("CreditSuisse") and BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, a nationalbanking corporation ("Bank of America"), as co-administrative agents (the "Co-Administrative Agents") for the Lenders hereunder, hereby agree as follows:
ARTICLE IDEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, thefollowing terms shall have the following meanings (such meanings to be equallyapplicable to both the singular and plural forms of the terms defined):
"ABC" means ABC, Inc. (successor in interest to Capital Cities/ABC,Inc.), a New York corporation and a wholly owned subsidiary of theBorrower, or any successor thereto.
"Administrative Agent" has the meaning specified in the recital ofparties to this Agreement.
"Administrative Agent's Account" means such account of theAdministrative Agent maintained by the Administrative Agent at the officeof Citibank at 399 Park Avenue, New York, New York 10043, as theAdministrative Agent shall notify the Borrower and the Lenders from time totime.
"Advance" means an advance by a Lender to the Borrower as part of aBorrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance,each of which shall be a "Type" of Advance.
"Affiliate" means, as to any Person, any other Person that, directlyor indirectly, controls, is controlled by or is under common control withsuch Person or is a director or officer of such Person.
"Agreement" means this 364-Day Credit Agreement, as it may be amended,supplemented or otherwise modified from time to time in accordance withSection 8.01.
"Applicable Lending Office" means, with respect to each Lender, suchLender's Domestic Lending Office in the case of a Base Rate Advance andsuch Lender's Eurodollar Lending Office in the case of a Eurodollar RateAdvance.
2
"Assignment and Acceptance" means an assignment and acceptance enteredinto by a Lender and an Eligible Assignee, and accepted by theAdministrative Agent and the Borrower, in substantially the form ofExhibit B hereto.
"Assuming Lender" has the meaning specified in Section 2.19(c).
"Assumption Agreement" has the meaning specified in Section 2.19(c).
"Bank of America" has the meaning specified in the recital of partiesto this Agreement.
"Base Rate" means, for each day in any period, a fluctuating interestrate per annum as shall be in effect from time to time, which rate perannum shall at all times for such day during such period be equal to thehighest of:
(a) the rate of interest announced publicly by Citibank in NewYork, New York, from time to time, as Citibank's base rate in effectfor such day;
(b) the sum (adjusted to the nearest 1/4 of one percent or, ifthere is no nearest 1/4 of one percent, to the next higher 1/4 of onepercent) of (i) 0.50%, (ii) the rate obtained by dividing (A) thelatest three-week moving average of secondary market morning offering
rates in the United States for three-month certificates of deposit ofmajor United States money market banks, such three-week moving average(adjusted on the basis of a year of 365 or 366 days, as the case maybe) being determined weekly on each Monday (or, if any such day is nota Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis ofsuch rates reported by certificate of deposit dealers to and publishedby the Federal Reserve Bank of New York or, if such publication shallbe suspended or terminated, on the basis of quotations for such ratesreceived by Citibank from three New York certificate of depositdealers of recognized standing selected by Citibank, by (B) apercentage equal to 100% minus the average of the daily percentagesspecified during such three-week period by the Board of Governors ofthe Federal Reserve System (or any successor thereto) for determiningthe maximum reserve requirement (including, but not limited to, anyemergency, supplemental or other marginal reserve requirement) forCitibank in respect of liabilities consisting of or including (amongother liabilities) three-month U.S. dollar nonpersonal time depositsin the United States, and (iii) the average during such three-weekperiod of the annual assessment rates estimated by Citibank fordetermining the then current annual assessment payable by Citibank tothe Federal Deposit Insurance Corporation (or any successor thereto)for insuring U.S. dollar deposits of Citibank in the United States;and
(c) 0.50% per annum above the Federal Funds Rate for such day.
"Base Rate Advance" means an Advance which bears interest as providedin Section 2.06(a)(i).
3
"Borrowing" means a borrowing consisting of simultaneous Advances ofthe same Type made by each of the Lenders pursuant to Section 2.01.
"Business Day" means a day of the year on which banks are not requiredor authorized to close in Los Angeles, California, or New York City, NewYork, or San Francisco, California, or, if the applicable Business Dayrelates to any Eurodollar Rate Advances, on which dealings are carried onin the London interbank market.
"Citibank" means Citibank, N.A., a national banking association.
"Co-Administrative Agents" has the meaning specified in the recital ofparties to this Agreement.
"Commitment" has the meaning specified in Section 2.01.
"Consenting Lender" has the meaning specified in Section 2.19(b).
"Convert", "Conversion" and "Converted" each refers to a conversion ofAdvances of one Type into Advances of another Type pursuant to Section 2.08or 2.09.
"Credit Suisse" has the meaning specified in the recital of parties tothis Agreement.
"CUSA" has the meaning specified in the recital of parties to thisAgreement.
"Debt" means, with respect to any Person: (a) indebtedness forborrowed money, (b) obligations evidenced by bonds, debentures, notes orother similar instruments, (c) obligations to pay the deferred purchaseprice of property or services (other than trade payables incurred in theordinary course of business), (d) obligations as lessee under leases whichshall have been or should be, in accordance with GAAP, recorded as capitalleases and (e) obligations under direct or indirect guaranties in respectof, and obligations (contingent or otherwise) to purchase or otherwiseacquire, or otherwise to assure a creditor against loss in respect of,indebtedness or obligations of any other Person of the kinds referred to inclauses (a) through (d) above.
"Disney" means Disney Enterprises, Inc., a Delaware corporation and awholly owned subsidiary of the Borrower, or any successor thereto.
"Domestic Lending Office" means, with respect to any Lender, theoffice of such Lender specified as its "Domestic Lending Office" oppositeits name on Schedule I hereto or in the Assumption Agreement or theAssignment and Acceptance, as the case may be, pursuant to which it becamea Lender, or such other office of such Lender as such Lender may from timeto time specify to the Borrower and the Administrative Agent for suchpurpose.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (a) a Lender or any Affiliate of a Lender or(b) any bank or other financial institution, or any other Person, which hasbeen approved in writing by the
4
Borrower and the Administrative Agent as an Eligible Assignee for purposesof this Agreement; provided, however, that neither the Borrower's approvalnor the Administrative Agent's approval shall be unreasonably withheld; andprovided further, however, that the Borrower may withhold its approval ifthe Borrower reasonably believes that an assignment to such EligibleAssignee pursuant to Section 8.07 will result in the incurrence ofincreased costs payable by the Borrower pursuant to Section 2.11 or 2.14.
"Environmental Claim" means any administrative, regulatory or judicial
action, suit, demand, claim, lien, notice or proceeding relating to anyEnvironmental Law or any Environmental Permit.
"Environmental Law" means any federal, state or local statute, law,rule, regulation, ordinance, code or duly promulgated policy or rule ofcommon law, now or hereafter in effect, and in each case as amended, andany judicial or administrative interpretation thereof, including any order,consent decree or judgment, relating to the environment, health, safety orany Hazardous Material.
"Environmental Permit" means any permit, approval, identificationnumber, license or other authorization required under any applicableEnvironmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, asamended from time to time, and the regulations promulgated and the rulingsissued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV ofERISA is a member of the Borrower's controlled group, or under commoncontrol with the Borrower, within the meaning of Section 414 of theInternal Revenue Code of 1986, as amended.
"ERISA Event" means: (a) (i) the occurrence with respect to a Plan ofa reportable event, within the meaning of Section 4043 of ERISA, unless the30-day notice requirement with respect thereto has been waived by thePension Benefit Guaranty Corporation or (ii) the provisions of paragraph(1) of Section 4043(b) of ERISA (without regard to paragraph (2) of suchSection) are applicable with respect to a contributing sponsor, as definedin Section 4001(a)(13) of ERISA, of a Plan, and an event described inparagraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA couldreasonably be expected to occur with respect to such Plan within thefollowing 30 days; (b) the provision by the administrator of any Plan of anotice of intent to terminate such Plan, pursuant to Section 4041(a)(2) ofERISA (including any such notice with respect to a plan amendment referredto in Section 4041(e) of ERISA); (c) the cessation of operations by theBorrower or any ERISA Affiliate at a facility in the circumstancesdescribed in Section 4062(e) of ERISA; (d) the withdrawal by the Borroweror any ERISA Affiliate from a Multiple Employer Plan during a plan year forwhich it was a substantial employer, as defined in Section 4001(a)(2) ofERISA; (e) the failure by the Borrower or any ERISA Affiliate to make apayment to a Plan described in Section 302(f)(1)(A) of ERISA; (f) theadoption of an amendment to a Plan requiring the provision of security tosuch Plan, pursuant to Section 307 of ERISA; or (g) the institution by thePension Benefit Guaranty Corporation of proceedings to terminate a Plan,pursuant to Section 4042 of ERISA, or the occurrence of any event orcondition
which is reasonably likely to constitute grounds under Section 4042 ofERISA for the termination of, or the appointment of a trustee toadminister, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term inRegulation D of the Board of Governors of the Federal Reserve System, as ineffect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender, theoffice of such Lender specified as its "Eurodollar Lending Office" oppositeits name on Schedule I hereto or in the Assumption Agreement or theAssignment and Acceptance, as the case may be, pursuant to which it becamea Lender (or, if no such office is specified, its Domestic Lending Office),or such other office of such Lender as such Lender may from time to timespecify to the Borrower and the Administrative Agent for such purpose.
"Eurodollar Rate" means, for any Interest Period for each EurodollarRate Advance comprising part of the same Borrowing, an interest rate perannum equal to the average (rounded upward to the nearest whole multiple of1/16 of 1% per annum, if such average is not such a multiple) of the rateper annum at which deposits in U.S. dollars are offered by the principaloffice of each of the Reference Banks in London, England to prime banks inthe London interbank market at 11:00 A.M. (London time) two Business Daysbefore the first day of such Interest Period for a period equal to suchInterest Period and in an amount substantially equal to such ReferenceBank's (or, in the case of Citibank, CUSA's) Eurodollar Rate Advancecomprising part of such Borrowing. The Eurodollar Rate for any InterestPeriod for each Eurodollar Rate Advance comprising part of the sameBorrowing shall be determined by the Administrative Agent on the basis ofapplicable rates furnished to and received by the Administrative Agent fromthe Reference Banks two Business Days before the first day of such InterestPeriod, subject, however, to the provisions of Section 2.08.
"Eurodollar Rate Advance" means an Advance which bears interest asprovided in Section 2.06(a)(ii).
"Eurodollar Rate Margin" means, as of any date, a percentage per annumdetermined by reference to the Public Debt Rating in effect on such date asset forth below:
Level 2-------Lower than AA-/Aa3 butat least A/A2 0.135%----------------------------------------------------Level 3-------Lower than A/A2 butat least A-/A3 0.145%----------------------------------------------------Level 4-------Lower than A-/A3 or noPublic Debt Rating in effect 0.180%====================================================
</TABLE>
6
"Eurodollar Rate Reserve Percentage" means, with respect to any Lenderfor any Interest Period for any Eurodollar Rate Advance, the reservepercentage applicable during such Interest Period (or, if more than onesuch percentage shall be so applicable, the daily average of suchpercentages for those days in such Interest Period during which any suchpercentage shall be so applicable) under regulations issued from time totime by the Board of Governors of the Federal Reserve System (or anysuccessor thereto) for determining the maximum reserve requirement(including, without limitation, any emergency, supplemental or othermarginal reserve requirement) for such Lender with respect to liabilitiesor assets consisting of or including Eurocurrency Liabilities having a termequal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Existing Credit Agreements" means, collectively, (a) the 364-DayCredit Agreement dated as of October 31, 1995 among DC Holdco, Inc.(predecessor in interest to The Walt Disney Company), the financialinstitutions party thereto, CUSA, as the administrative agent thereunder,and Credit Suisse, as the co-administrative agent thereunder, as amended,supplemented or otherwise modified to (but not including) the EffectiveDate, and (b) the Five-Year Credit Agreement dated as of October 31, 1995among DC Holdco, Inc. (predecessor in interest to The Walt Disney Company),the financial institutions party thereto, CUSA, as the administrative agentthereunder, and Credit Suisse, as the co-administrative agent thereunder,as amended, supplemented or otherwise modified to (but not including) theEffective Date.
"Extension Date" has the meaning specified in Section 2.19(b).
"Facility Fee Percentage" means, as of any date, a percentage per
S&P/Moody's Percentage====================================================<S> <C>Level 1-------AA-/Aa3 or above 0.030%----------------------------------------------------Level 2-------Lower than AA-/Aa3 butat least A/A2 0.040%----------------------------------------------------Level 3-------Lower than A/A2 butat least A-/A3 0.055%----------------------------------------------------Level 4-------Lower than A-/A3 or noPublic Debt Rating in effect 0.070%====================================================
</TABLE>
7
"Federal Funds Rate" means, for any period, a fluctuating interestrate per annum equal for each day during such period to the weightedaverage of the rates on overnight federal funds transactions with membersof the Federal Reserve System arranged by federal funds brokers, aspublished for such day (or, if such day is not a Business Day, for theimmediately preceding Business Day) by the Federal Reserve Bank of NewYork, or, if such rate is not so published for any day which is a BusinessDay, the average of the quotations for such day on such transactionsreceived by the Administrative Agent from three federal funds brokers ofrecognized standing selected by the Administrative Agent.
"Five-Year Credit Agreement" means the Five-Year Credit Agreementbeing entered into on the date of this Agreement among the Borrower, thebanks, financial institutions and other institutional lenders partythereto, CUSA, as the administrative agent thereunder, and Credit Suisseand Bank of America, as the co-administrative agents thereunder, as such
agreement may be amended, supplemented or otherwise modified hereafter fromtime to time.
"GAAP" means generally accepted accounting principles consistent withthose applied in the preparation of the audited financial statementsreferred to in Section 4.01(c)(i) dated September 30, 1995.
"Hazardous Material" means (a) any petroleum or petroleum product,natural or synthetic gas, asbestos in any form that is or could becomefriable, urea formaldehyde foam insulation, or radon gas, (b) any substancedefined as or included in the definition of "hazardous substances",hazardous wastes", hazardous materials", "toxic substances", "contaminants"or "pollutants", or words of similar import, under any applicableEnvironmental Law or (c) any other substance to which exposure is regulatedby any governmental or regulatory authority.
"Indemnified Matters" has the meaning specified in Section 8.08.
"Indemnified Party" has the meaning specified in Section 8.08.
"Informed Parties" has the meaning specified in Section 8.09.
"Initial Lender" has the meaning specified in the recital of partiesto this Agreement.
"Interest Period" means, for each Eurodollar Rate Advance comprisingpart of the same Borrowing, the period commencing on the date of suchEurodollar Rate Advance or on the date of the Conversion of any Base RateAdvance into such Eurodollar Rate Advance and ending on the last day of theperiod selected by the Borrower pursuant to the provisions below and,thereafter, each subsequent period commencing on the last day of theimmediately preceding Interest Period and ending on the last day of theperiod selected by the Borrower pursuant to the provisions below. Theduration of each such Interest Period shall be one, two, three, six or, ifgenerally available to all of the Lenders, twelve months as the Borrowermay, upon notice received by the Administrative Agent not later than 1:00P.M. (New York City time) on the third Business Day prior to the first dayof such Interest Period, select; provided, however, that:
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(i) Interest Periods commencing on the same date forEurodollar Rate Advances comprising part of the same Borrowing shallbe of the same duration;
(ii) whenever the last day of any Interest Period wouldotherwise occur on a day other than a Business Day, the last day ofsuch Interest Period shall be extended to occur on the next succeedingBusiness Day, provided, however, that if such extension would causethe last day of such Interest Period to occur in the next succeeding
calendar month, the last day of such Interest Period shall occur onthe immediately preceding Business Day;
(iii) whenever the first day of any Interest Period occurs on aday of an initial calendar month for which there is no numericallycorresponding day in the calendar month that succeeds such initialcalendar month by the number of months equal to the number of monthsin such Interest Period, such Interest Period shall end on the lastBusiness Day of such succeeding calendar month; and
(iv) the Borrower may not select for any Advance any InterestPeriod which ends after the scheduled Revolver Termination Date thenin effect or, if the Advances have been converted to a term loanpursuant to Section 2.05 prior to the time of such selection, whichends after the Maturity Date.
"IRS" has the meaning specified in Section 2.14(e).
"Lenders" means, collectively, each Initial Lender, each AssumingLender that shall become a party hereto pursuant to Section 2.19 and eachEligible Assignee that shall become a party hereto pursuant toSection 8.07; provided, however, that for purposes of any determination tobe made under Section 2.07, 2.11, 2.12 or 8.04(b) with respect to CUSA, inits capacity as a Lender, the term "Lenders" shall be deemed to includeCitibank.
"Lien" means any lien, security interest or other charge orencumbrance of any kind, or any other type of preferential arrangementwhich has the same effect as a lien or security interest.
"Majority Lenders" means, at any time, Lenders owed at least amajority in interest of the aggregate unpaid principal amount of theAdvances owing to the Lenders at such time, or, if no such principal amountis outstanding at such time, Lenders having at least a majority in interestof the Commitments at such time; provided, however, that neither theBorrower nor any of its Affiliates, if a Lender, shall be included in thedetermination of the Majority Lenders at any time.
"Material Subsidiary" means, at any date of determination, asubsidiary of the Borrower that, either individually or together with itssubsidiaries, taken as a whole, has total assets exceeding $100,000,000 onsuch date.
"Maturity Date" means the earlier of (a) the second anniversary of theRevolver Termination Date and (b) the date of termination in whole of theaggregate Commitments pursuant to Section 2.04 or 6.01.
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"Moody's" means Moody's Investors Service, Inc. or any successor
"Multiemployer Plan" means a multiemployer plan, as defined inSection 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliateis making or accruing an obligation to make contributions, or has withinany of the preceding five plan years made or accrued an obligation to makecontributions.
"Multiple Employer Plan" means a single employer plan, as defined inSection 4001(a)(15) of ERISA, that (i) is maintained for employees of theBorrower or any ERISA Affiliate and at least one Person other than theBorrower and the ERISA Affiliates or (ii) was so maintained and in respectof which the Borrower or an ERISA Affiliate could have liability underSection 4064 or 4069 of ERISA in the event such plan has been or were to beterminated.
"Non-Consenting Lender" has the meaning specified in Section 2.19(b).
"Note" has the meaning specified in Section 2.17.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Other Taxes" has the meaning specified in Section 2.14(b).
"Person" means an individual, partnership, corporation (including abusiness trust), joint stock company, trust, unincorporated association,joint venture or other entity, or a government or any political subdivisionor agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Public Debt Rating" means, as of any date of determination, thehigher rating that has been most recently announced by either S&P orMoody's, as the case may be, for any class of non-credit enhanced long-termsenior unsecured public debt issued by the Borrower. For purposes of theforegoing, (a) if only one of S&P and Moody's shall have in effect a PublicDebt Rating, the Eurodollar Rate Margin and the Facility Fee Percentageshall be determined by reference to the available rating; (b) if neitherS&P nor Moody's shall have in effect a Public Debt Rating, the EurodollarRate Margin and the Facility Fee Percentage will be set in accordance withLevel 4 under the definition of "Eurodollar Rate Margin" or "Facility FeePercentage", as the case may be; (c) if the ratings established by S&P andMoody's shall fall within different levels, the Eurodollar Rate Margin andthe Facility Fee Percentage shall be based upon the higher rating; (d) ifany rating established by S&P or Moody's shall be changed, such changeshall be effective as of the date on which such change is first announcedpublicly by the rating agency making such change; and (e) if S&P or Moody'sshall change the basis on which ratings are established, each reference tothe Public Debt Rating announced by S&P or Moody's, as the case may be,shall refer to the then equivalent rating by S&P or Moody's, as the casemay be.
"Reference Banks" means Citibank, Credit Suisse, Bank of America andBarclays Bank PLC, or, in the event that less than two of such banks remainLenders hereunder at any time, any
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other commercial bank designated by the Borrower and approved by theMajority Lenders as constituting a "Reference Bank" hereunder.
"Register" has the meaning specified in Section 8.07(c).
"Revolver Termination Date" means the earlier of (a) October 29, 1997,subject to the extension thereof pursuant to Section 2.19, and (b) the dateof termination in whole of the aggregate Commitments pursuant toSection 2.04 or 6.01; provided, however, that the Revolver Termination Dateof any Lender that is a Non-Consenting Lender to any requested extensionpursuant to Section 2.19 shall be the Revolver Termination Date in effectimmediately prior to the applicable Extension Date for all purposes of thisAgreement.
"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"SEC" has the meaning specified in Section 5.01(d)(i).
"Significant Subsidiary" means any subsidiary of the Borrower or anyof its subsidiaries that constitutes a "significant subsidiary" underRule 405 promulgated by the SEC under the Securities Act of 1933, asamended.
"Single Employer Plan" means a single employer plan, as defined inSection 4001(a)(15) of ERISA, that (i) is maintained for employees of theBorrower or an ERISA Affiliate and no Person other than the Borrower andthe ERISA Affiliates or (ii) was so maintained and in respect of which theBorrower or an ERISA Affiliate could have liability under Section 4069 ofERISA in the event such plan has been or were to be terminated.
"Taxes" has the meaning specified in Section 2.14(a).
"Term Loan Conversion Date" means the Revolver Termination Date onwhich all Advances outstanding on such date are converted into a term loanpursuant to Section 2.05.
"Term Loan Election" has the meaning specified in Section 2.05.
"Type" has the meaning specified in the definition of "Advance".
"United States" and "U.S." each means the United States of America.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
---------------------------computation of periods of time from a specified date to a later specified date,the word "from" means "from and including" and the words "to" and "until" eachmeans "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not----------------
specifically defined herein shall be construed in accordance with GAAP.
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ARTICLE IIAMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. Each Lender severally agrees, on the------------
terms and conditions hereinafter set forth, to make Advances to the Borrowerfrom time to time on any Business Day during the period from the Effective Dateuntil the Revolver Termination Date in an aggregate amount not to exceed at anytime outstanding the amount set forth opposite such Lender's name on thesignature pages hereof or, if such Lender has become a Lender hereunder pursuantto an Assumption Agreement, the amount set forth as the Commitment of suchLender in such Assumption Agreement or, if such Lender has entered into anAssignment and Acceptance, the amount set forth for such Lender in the Registermaintained by the Administrative Agent pursuant to Section 8.07(c), as suchamount may be reduced pursuant to Section 2.04 (such Lender's "Commitment").Each Borrowing shall be in an aggregate amount of $5,000,000 or an integralmultiple of $1,000,000 in excess thereof and shall consist of Advances of thesame Type made on the same day by the Lenders ratably according to theirrespective Commitments. Within the limits of each Lender's Commitment, theBorrower from time to time may borrow under this Section 2.01, prepay pursuantto Section 2.10 and reborrow under this Section 2.01.
SECTION 2.02. Making the Advances. (a) Each Borrowing shall be made-------------------
on notice, given not later than 11:00 A.M. (New York City time) on the sameBusiness Day as the date of a proposed Borrowing comprised of Base Rate Advancesand not later than 1:00 P.M. (New York City time) on the third Business Dayprior to the date of a proposed Borrowing comprised of Eurodollar Rate Advances,by the Borrower to the Administrative Agent, which shall give to each Lenderprompt notice thereof by telecopier or telex. Each such notice of a Borrowing (a"Notice of Borrowing") shall be by telecopier or telex, or by telephone,confirmed immediately by telecopier or telex, in substantially the form ofExhibit A hereto, specifying therein the requested (i) date of such Borrowing(which shall be a Business Day), (ii) Type of Advances comprising suchBorrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of aBorrowing comprised of Eurodollar Rate Advances, initial Interest Period foreach such Advance. Each Lender shall, before 1:00 P.M. (New York City time) onthe date of such Borrowing, make available for the account of its ApplicableLending Office to the Administrative Agent at the Administrative Agent's
Account, in same day funds, such Lender's ratable portion of such Borrowing.After the Administrative Agent's receipt of such funds and upon fulfillment ofthe applicable conditions set forth in Article III, the Administrative Agentwill make such funds available to the Borrower at the office where theAdministrative Agent's Account is maintained.
(b) Anything in subsection (a) above or Section 2.01 to the contrarynotwithstanding, the Borrower may not select Eurodollar Rate Advances for anyBorrowing if the aggregate amount of such Borrowing is less than $20,000,000 orif the obligation of the Lenders to make Eurodollar Rate Advances shall besuspended at such time pursuant to Section 2.08.
(c) Each Notice of Borrowing shall be irrevocable and binding on theBorrower. In the case of any Borrowing which the related Notice of Borrowingspecifies is to be comprised of Eurodollar Rate Advances, the Borrower shallindemnify each Lender against any loss, cost or expense incurred by such Lenderas a result of any failure to fulfill on or before the date specified in suchNotice of Borrowing for such Borrowing the applicable conditions set forth inArticle III, including, without limitation, any loss, cost or expense incurredby reason of the liquidation or reemployment of deposits
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or other funds acquired by such Lender to fund the Advance to be made by suchLender as part of such Borrowing when such Advance, as a result of such failure,is not made on such date.
(d) Unless the Administrative Agent shall have received notice froma Lender prior to the date of any Borrowing that such Lender will not makeavailable to the Administrative Agent such Lender's ratable portion of suchBorrowing, the Administrative Agent may assume that such Lender has made suchportion available to the Administrative Agent on the date of such Borrowing inaccordance with subsection (a) of this Section 2.02 and the Administrative Agentmay, in reliance upon such assumption, make available to the Borrower on suchdate a corresponding amount. If and to the extent that any Lender shall not haveso made such ratable portion available to the Administrative Agent, such Lenderagrees to pay to the Administrative Agent forthwith on demand such correspondingamount together with interest thereon, for each day from the date such amount ismade available to the Borrower until the date such amount is paid to theAdministrative Agent, at the Federal Funds Rate; provided, however, that(i) within two Business Days after any Lender shall fail to make such ratableportion available to the Administrative Agent, the Administrative Agent shallnotify the Borrower of such failure and (ii) if such Lender shall not have paidsuch corresponding amount to the Administrative Agent within two Business Daysafter such demand is made of such Lender by the Administrative Agent, theBorrower agrees to repay to the Administrative Agent forthwith, upon demand bythe Administrative Agent to the Borrower, such corresponding amount togetherwith interest thereon, for each day from the date such amount is made availableto the Borrower until the date such amount is repaid to the AdministrativeAgent, at the interest rate applicable at the time to Advances comprising such
Borrowing. If and to the extent such corresponding amount shall be paid by suchLender to the Administrative Agent in accordance with this Section 2.02(d), suchamount so paid shall constitute such Lender's Advance as part of such Borrowingfor all purposes of this Agreement.
(e) The failure of any Lender to make the Advance to be made by itas part of any Borrowing shall not relieve any other Lender of its obligation,if any, hereunder to make its Advance on the date of such Borrowing, but noLender shall be responsible for the failure of any other Lender to make theAdvance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Facility Fee. The Borrower agrees to pay to each------------
Lender a facility fee on the average daily amount (whether used or unused) ofsuch Lender's Commitment from the Effective Date, in the case of each InitialLender, and from the later of (a) the Effective Date and (b) the effective datespecified in the Assumption Agreement or the Assignment and Acceptance pursuantto which it became a Lender, in the case of each other Lender, until, in eachcase, the Revolver Termination Date or, if the Borrower has made the Term LoanElection pursuant to Section 2.05 on or prior to such date, the Maturity Date,payable quarterly in arrears on the first Business Day of each January, April,July and October during the term of such Lender's Commitment, commencingJanuary 2, 1997, and on the Revolver Termination Date or, if the Borrower hasmade the Term Loan Election pursuant to Section 2.05 on or prior to such date,the Maturity Date, at the rate per annum equal to the Facility Fee Percentage ineffect from time to time.
SECTION 2.04. Reduction of the Commitments. (a) Optional. The---------------------------- --------
Borrower shall have the right, upon at least three Business Days' notice to theAdministrative Agent, to terminate in whole or reduce ratably in part the unusedportions of the respective Commitments of the Lenders, provided that eachpartial reduction shall be in the aggregate amount of $5,000,000 or an integralmultiple of $1,000,000 in excess thereof.
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(b) Mandatory. On the Revolver Termination Date, if the Borrower---------
has made the Term Loan Election in accordance with Section 2.05 prior to suchdate, and from time to time thereafter upon each prepayment of the Advances, theaggregate Commitments of the Lenders under this Agreement shall be automaticallyand permanently reduced on a pro rata basis by an amount equal to the amount bywhich the aggregate Commitments of the Lenders under this Agreement immediatelyprior to such reduction exceeds the aggregate unpaid principal amount of theAdvances outstanding at such time.
SECTION 2.05. Repayment of Advances. The Borrower shall, subject to---------------------
the next succeeding sentence, repay to each Lender on the Revolver Termination
Date the aggregate principal amount of the Advances owing to such Lender on suchdate. The Borrower may, upon not less than 15 days' notice to the AdministrativeAgent, elect (the "Term Loan Election") to convert all of the Advancesoutstanding on the Revolver Termination Date in effect at such time into a termloan which the Borrower shall repay in full ratably to the Lenders on theMaturity Date; provided that no Event of Default, or event that with the givingof notice or passage of time or both would constitute an Event of Default, hasoccurred and is continuing on the date of notice of the Term Loan Election or onthe Term Loan Conversion Date on which such election is to be effected.
SECTION 2.06. Interest on Advances. (a) Scheduled Interest. The-------------------- ------------------
Borrower shall pay to each Lender interest on the unpaid principal amount ofeach Advance owing to such Lender from the date of such Advance until suchprincipal amount shall be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a------------------
Base Rate Advance, a rate per annum equal at all times to the remainder of(A) the Base Rate in effect from time to time minus (B) the Facility FeePercentage in effect from time to time, payable quarterly in arrears on thefirst Business Day of each January, April, July, and October during suchperiods and on the date such Base Rate Advance shall be Converted or paidin full.
(ii) Eurodollar Rate Advances. During such periods as such Advance------------------------
is a Eurodollar Rate Advance, a rate per annum equal at all times duringeach Interest Period for such Advance to the sum of (A) the Eurodollar Ratefor such Interest Period for such Advance and (B) the Eurodollar RateMargin in effect from time to time, payable in arrears on the last day ofsuch Interest Period and, if such Interest Period has a duration of morethan three months, on the date which occurs three months and, ifapplicable, six months, nine months and twelve months after the first dayof such Interest Period and on the date such Eurodollar Rate Advance shallbe Converted or paid in full.
(b) Default Interest. The Borrower shall pay interest on the unpaid----------------
principal amount of each Advance that is not paid when due and on the unpaidamount of all interest, fees and other amounts payable hereunder that is notpaid when due, payable on demand, at a rate per annum equal at all times to(i) in the case of any amount of principal, the greater of (x) 2% per annumabove the rate per annum required to be paid on such Advance immediately priorto the date on which such amount became due and (y) 2% per annum above the BaseRate in effect from time to time and (ii) to the fullest extent permitted bylaw, in the case of all other amounts, 2% per annum above the Base Rate ineffect from time to time.
SECTION 2.07. Additional Interest on Eurodollar Rate Advances. The-----------------------------------------------
Borrower shall pay to each Lender, so long as such Lender shall be requiredunder regulations of the Board of Governors of the Federal Reserve System tomaintain reserves with respect to liabilities or assets consisting of orincluding Eurocurrency Liabilities, additional interest on the unpaid principalamount of each Eurodollar Rate Advance of such Lender, from the date of suchAdvance until such principal amount is paid in full, at an interest rate perannum equal at all times to the remainder obtained by subtracting (i) theEurodollar Rate for the applicable Interest Period for such Advance from(ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to100% minus the Eurodollar Rate Reserve Percentage of such Lender for suchInterest Period, payable on each date on which interest is payable on suchAdvance. Such additional interest shall be determined by such Lender andnotified in reasonable detail to the Borrower through the Administrative Agent.
SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank---------------------------
agrees to furnish to the Administrative Agent timely information for the purposeof determining each Eurodollar Rate. If any one or more of the Reference Banksshall not furnish such timely information to the Administrative Agent for thepurpose of determining such interest rate, the Administrative Agent shalldetermine such interest rate on the basis of timely information furnished by theremaining Reference Banks.
(b) The Administrative Agent shall give prompt notice to theBorrower and the Lenders of the applicable interest rate determined by theAdministrative Agent for purposes of Section 2.06(a)(i) or (a)(ii), and therate, if any, furnished by each Reference Bank for the purpose of determiningthe applicable interest rate under Section 2.06(a)(ii).
(c) If fewer than two Reference Banks furnish timely information tothe Administrative Agent for purposes of determining the Eurodollar Rate for anyEurodollar Rate Advances, (i) the Administrative Agent shall forthwith notifythe Borrower and the Lenders that the interest rate cannot be determined forsuch Eurodollar Rate Advances, (ii) each such Advance will automatically, on thelast day of the then existing Interest Period therefor, Convert into a Base RateAdvance (or, if such Advance is then a Base Rate Advance, will continue as aBase Rate Advance), and (iii) the obligation of the Lenders to make, or toConvert Advances into, Eurodollar Rate Advances shall be suspended until theAdministrative Agent shall notify the Borrower and the Lenders that thecircumstances causing such suspension no longer exist.
(d) If, with respect to any Eurodollar Rate Advances, the MajorityLenders notify the Administrative Agent that the Eurodollar Rate for anyInterest Period for such Advances will not adequately reflect the cost to suchMajority Lenders (which cost each such Majority Lender reasonably determines ingood faith is material) of making, funding or maintaining their respectiveEurodollar Rate Advances for such Interest Period, the Administrative Agentshall forthwith so notify the Borrower and the Lenders, whereupon, unless the
Eurodollar Rate Margin shall be increased to reflect such costs as determined bysuch Majority Lenders and as agreed by the Borrower, (i) each Eurodollar RateAdvance will automatically, on the last day of the then existing Interest Periodtherefor, Convert into a Base Rate Advance, and (ii) the obligation of theLenders to make, or to Convert Advances into, Eurodollar Rate Advances shall besuspended until the Majority Lenders shall notify the Administrative Agent, andthe Administrative Agent shall in turn notify the Borrower and the Lenders, thatthe circumstances causing such suspension no longer exist. The AdministrativeAgent shall use reasonable efforts to determine from time to time whether thecircumstances causing such suspension no longer exist and, promptly after the
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Administrative Agent knows that the circumstances causing such suspension nolonger exist, the Administrative Agent shall so notify the Borrower and theLenders.
(e) If the Borrower shall fail to select the duration of anyInterest Period for any Eurodollar Rate Advances in accordance with theprovisions contained in the definition of "Interest Period" in Section 1.01, theAdministrative Agent will forthwith so notify the Borrower and the Lenders andsuch Advances will automatically, on the last day of the then existing InterestPeriod therefor, Convert into Base Rate Advances.
(f) On the date on which the aggregate unpaid principal amount ofEurodollar Rate Advances comprising any Borrowing shall be reduced, by paymentor prepayment or otherwise, to less than $20,000,000, such Eurodollar RateAdvances shall automatically Convert into Base Rate Advances and, on and aftersuch date, the right of the Borrower to Convert such Advances into EurodollarRate Advances shall terminate; provided, however, that if and so long as eachsuch Eurodollar Rate Advance shall have the same Interest Period as EurodollarRate Advances comprising another Borrowing or Borrowings, and the aggregateunpaid principal amount of all such Eurodollar Rate Advances shall equal orexceed $20,000,000, the Borrower shall have the right to continue all suchEurodollar Rate Advances as, or to Convert all such Advances into, EurodollarRate Advances having such Interest Period.
(g) Upon the occurrence and during the continuance of any Event ofDefault under Section 6.01(a), (i) each Eurodollar Rate Advance willautomatically, on the last day of the then existing Interest Period therefor,Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make,or to Convert Advances into, Eurodollar Rate Advances shall be suspended.
SECTION 2.09. Optional Conversion of Advances. The Borrower may on-------------------------------
any Business Day, upon notice given to the Administrative Agent not later than11:00 A.M. (New York City time) on the same Business Day as the date of theproposed Conversion in the case of a Conversion of Eurodollar Rate Advances intoBase Rate Advances, and not later than 1:00 P.M. (New York City time) on thethird Business Day prior to the date of the proposed Conversion in the case of a
Conversion of Base Rate Advances into Eurodollar Rate Advances or of EurodollarRate Advances of one Interest Period into Eurodollar Rate Advances of anotherInterest Period, as the case may be, and subject to the provisions of Sections2.08, 2.09 and 2.12, Convert all Advances of one Type comprising the sameBorrowing into Advances of the other Type; provided, however, that anyConversion of any Eurodollar Rate Advances into Base Rate Advances or intoEurodollar Rate Advances of another Interest Period shall be made on, and onlyon, the last day of an Interest Period for such Eurodollar Rate Advances.Promptly upon receipt from the Borrower of a notice of a proposed Conversionhereunder, the Administrative Agent shall give notice of such proposedConversion to each Lender. Each such notice of a Conversion shall, within therestrictions set forth above, specify (i) the date of such Conversion (whichshall be a Business Day), (ii) the Advances to be Converted, and (iii) if suchConversion is into Eurodollar Rate Advances, the duration of the initialInterest Period for each such Advance. The Borrower may Convert all EurodollarRate Advances of any one Lender into Base Rate Advances of such Lender inaccordance with the provisions of Section 2.12 by complying with the proceduresset forth therein and in this Section 2.09 as though each reference in thisSection 2.09 to Advances of any Type was to such Advances of such Lender. Eachsuch notice of Conversion shall, subject to the provisions of Sections 2.08 and2.12, be irrevocable and binding on the Borrower.
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SECTION 2.10. Prepayments of Advances. The Borrower may, upon not-----------------------
less than the same Business Day's notice to the Administrative Agent receivednot later than 11:00 A.M. (New York City time) in the case of Borrowingsconsisting of Base Rate Advances and upon at least three Business Days' noticeto the Administrative Agent received not later than 1:00 P.M. (New York Citytime) in the case of Borrowings consisting of Eurodollar Rate Advances, statingthe proposed date and aggregate principal amount of the prepayment, and if suchnotice is given the Borrower shall, prepay the outstanding principal amounts ofthe Advances constituting part of the same Borrowings in whole or ratably inpart, together with accrued interest to the date of such prepayment on theprincipal amount prepaid; provided, however, that (a) each partial prepaymentshall be in an aggregate principal amount of $1,000,000 or an integral multipleof $1,000,000 in excess thereof, and (b) in the case of any such prepayment ofEurodollar Rate Advances, the Borrower shall be obligated to reimburse theLenders in respect thereof pursuant to Section 8.04(b).
SECTION 2.11. Increased Costs. (a) If after the date hereof, due to---------------
either (i) the introduction of or any change (other than any change by way ofimposition or increase of reserve requirements included in the Eurodollar RateReserve Percentage) in or in the interpretation of any law or regulation or (ii)the compliance with any hereafter promulgated guideline or request from anycentral bank or other governmental authority (whether or not having the force oflaw), there shall be any increase in the cost (excluding any allocation ofcorporate overhead) to any Lender (which cost such Lender reasonably determines
in good faith is material) of agreeing to make or making, funding or maintainingEurodollar Rate Advances, then such Lender shall so notify the Borrower promptlyafter such Lender knows of such increased cost and determines that such cost ismaterial and the Borrower shall from time to time, upon demand by such Lender(with a copy of such demand to the Administrative Agent), pay to theAdministrative Agent for the account of such Lender additional amountssufficient to compensate such Lender for such increased cost. A certificate ofsuch Lender as to the amount of such increased cost in reasonable detail andstating the basis upon which such amount has been calculated and certifying thatsuch Lender's method of allocating such costs is fair and reasonable and thatsuch Lender's demand for payment of such costs hereunder is not inconsistentwith its treatment of other borrowers which, as a credit matter, aresubstantially similar to the Borrower and which are subject to similarprovisions, submitted to the Borrower and the Administrative Agent by suchLender, shall be conclusive and binding for all purposes, absent manifest error.
(b) If, after the date hereof, either (i) the introduction of orchange in or in the interpretation of any law or regulation or (ii) thecompliance by any Lender with any hereafter promulgated guideline or requestfrom any central bank or other governmental authority (whether or not having theforce of law) affects or would affect the amount of capital required or expectedto be maintained by such Lender or any corporation controlling such Lender andthe amount of such capital is materially increased by or based upon theexistence of such Lender's commitment to lend hereunder and other commitments ofthis type, then such Lender shall so notify the Borrower promptly after suchLender makes such determination and, upon demand by such Lender (with a copy ofsuch demand to the Administrative Agent), the Borrower shall pay to such Lenderwithin five days from the date of such demand, from time to time as specified bysuch Lender, additional amounts sufficient to compensate such Lender or suchcorporation in the light of such circumstances, to the extent that such Lenderreasonably determines such increase in capital to be allocable to the existenceof such Lender's commitment to lend hereunder. A certificate of such Lender asto such amount in reasonable detail and stating the basis upon which such amounthas been calculated and certifying that such Lender's method of allocating suchincrease of capital is fair and reasonable and that such Lender's demand forpayment of such increase of
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capital hereunder is not inconsistent with its treatment of other borrowerswhich, as a credit matter, are substantially similar to the Borrower and whichare subject to similar provisions, submitted to the Borrower and theAdministrative Agent by such Lender, shall be conclusive and binding for allpurposes, absent manifest error.
(c) The Borrower shall not be obligated to pay under thisSection 2.11 any amounts which relate to costs or increases of capital incurredprior to the 12 months immediately preceding the date of demand for payment ofsuch amounts, unless the applicable law, regulation, guideline or requestresulting in such costs or increases of capital is imposed retroactively. In the
case of any law, regulation, guideline or request which is imposedretroactively, the Lender making demand for payment of any amount under thisSection 2.11 shall notify the Borrower not later than 12 months from the datethat such Lender should reasonably have known of such law, regulation, guidelineor request and the Borrower's obligation to compensate such Lender for suchamount is contingent upon such Lender's so notifying the Borrower; provided,however, that any failure by such Lender to provide such notice shall not affectthe Borrower's obligations under this Section 2.11 with respect to amountsresulting from costs or increases of capital incurred after the date whichoccurs 12 months immediately preceding the date on which such Lender notifiedthe Borrower of such law, regulation, guideline or request.
(d) If any Lender shall subsequently recoup any costs (other thanfrom the Borrower) for which such Lender has theretofore been compensated by theBorrower under this Section 2.11, such Lender shall remit to the Borrower anamount equal to the amount of such recoupment. Amounts required to be paid bythe Borrower pursuant to this Section 2.11 shall be paid in addition to, andwithout duplication of, any amounts required to be paid pursuant toSection 2.14.
SECTION 2.12. Illegality. Notwithstanding any other provision of----------
this Agreement, if any Lender shall notify the Administrative Agent that theintroduction of or any change in or in the interpretation of any law orregulation after the date hereof makes it unlawful, or any central bank or othergovernmental authority asserts that it is unlawful, for any Lender or itsEurodollar Lending Office to perform its obligations hereunder to makeEurodollar Rate Advances or to fund or maintain Eurodollar Rate Advanceshereunder, (i) the obligation of such Lender to make, or to Convert Base RateAdvances into, Eurodollar Rate Advances shall be suspended until such Lendershall notify the Administrative Agent, and the Administrative Agent shall notifythe Borrower and the other Lenders (which notice shall be given promptly afterthe Administrative Agent knows that the circumstances causing such suspension nolonger exist), that the circumstances causing such suspension no longer existand (ii) the Borrower shall forthwith prepay in full all Eurodollar RateAdvances of such Lender then outstanding, together with interest accruedthereon, unless the Borrower, within five Business Days of notice from theAdministrative Agent or, if permitted by law, on and as of the last day of thethen existing Interest Period for such Eurodollar Rate Advances, Converts allEurodollar Rate Advances of such Lender then outstanding into Base Rate Advancesin accordance with Section 2.09.
SECTION 2.13. Payments and Computations. (a) The Borrower shall-------------------------
make each payment hereunder and under the Notes, if any, not later than 11:00A.M. (New York City time) on the day when due in U.S. dollars to theAdministrative Agent at the Administrative Agent's Account in same day funds.The Administrative Agent will promptly thereafter cause to be distributed likefunds relating to the payment of principal or interest or facility fees ratably(other than amounts payable pursuant to Sections 2.07, 2.11, 2.14, 8.04 and8.08) to the Lenders for the account of their respective Applicable Lending
Offices, and like funds relating to the payment of any other amount payable toany Lender to
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such Lender for the account of its Applicable Lending Office, in each case to beapplied in accordance with the terms of this Agreement. Upon any AssumingLender becoming a Lender hereunder as a result of an extension of the RevolverTermination Date pursuant to Section 2.19, and upon the Administrative Agent'sreceipt of such Lender's Assumption Agreement and recording of the informationcontained therein in the Register, from and after the applicable Extension Date,the Administrative Agent shall make all payments hereunder and under any Notesissued in connection therewith in respect of the interest assumed thereby to theAssuming Lender. Upon its acceptance of an Assignment and Acceptance andrecording of the information contained therein in the Register pursuant toSection 8.07(d), from and after the effective date specified in such Assignmentand Acceptance, the Administrative Agent shall make all payments hereunder andunder the Notes, if any, issued in connection therewith in respect of theinterest assigned thereby to the Lender assignee thereunder, and the parties tosuch Assignment and Acceptance shall make all appropriate adjustments in suchpayments for periods prior to such effective date directly between themselves.
(b) All computations of interest based on clause (a) or (b) of thedefinition of "Base Rate" shall be made by the Administrative Agent on thebasis of a year of 365 or 366 days, as the case may be, and all computations ofinterest based on the Eurodollar Rate or the Federal Funds Rate and of facilityfees shall be made by the Administrative Agent, and all computations ofadditional interest pursuant to Section 2.07 shall be made by a Lender, on thebasis of a year of 360 days, in each case for the actual number of days(including the first day but excluding the last day) occurring in the period forwhich such interest or facility fees are payable. Each determination by theAdministrative Agent (or, in the case of Section 2.07, by a Lender) of aninterest rate hereunder shall be conclusive and binding for all purposes, absentmanifest error.
(c) Whenever any payment hereunder or under the Notes, if any, shallbe stated to be due on a day other than a Business Day, such payment shall bemade on the next succeeding Business Day, and such extension of time shall insuch case be included in the computation of payment of interest or facilityfees, as the case may be; provided, however, that if such extension would causepayment of interest on or principal of Eurodollar Rate Advances to be made inthe next following calendar month, such payment shall be made on the immediatelypreceding Business Day.
(d) Unless the Administrative Agent shall have received notice fromthe Borrower prior to the date on which any payment is due to the Lendershereunder that the Borrower will not make such payment in full, theAdministrative Agent may assume that the Borrower has made such payment in fullto the Administrative Agent on such date and the Administrative Agent may, inreliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to theextent that the Borrower shall not have so made such payment in full to theAdministrative Agent, each Lender shall repay to the Administrative Agentforthwith on demand such amount distributed to such Lender together withinterest thereon, for each day from the date such amount is distributed to suchLender until the date such Lender repays such amount to the AdministrativeAgent, at the Federal Funds Rate.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower-----
hereunder or under the Notes, if any, shall be made, in accordance withSection 2.13, free and clear of and without deduction for any and all present orfuture taxes, levies, imposts, deductions, charges or withholdings, and allliabilities with respect thereto, excluding, in the case of each Lender and theAdministrative Agent, taxes imposed on its income, and franchise taxes imposedon it, by the jurisdiction under the laws of which
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such Lender or the Administrative Agent (as the case may be) is organized or anypolitical subdivision thereof and, in the case of each Lender, taxes imposed onits income, and franchise taxes imposed on it, by the jurisdiction of suchLender's Applicable Lending Office or any political subdivision thereof or byany other jurisdiction in which such Lender or the Administrative Agent is doingbusiness that is unrelated to this Agreement (all such non-excluded taxes,levies, imposts, deductions, charges, withholdings and liabilities beinghereinafter referred to as "Taxes"). If the Borrower shall be required by lawto deduct any Taxes from or in respect of any sum payable hereunder to anyLender or the Administrative Agent, (i) the sum payable shall be increased asmay be necessary so that after making all required deductions (includingdeductions applicable to additional sums payable under this Section 2.14) suchLender or the Administrative Agent (as the case may be) receives an amount equalto the sum it would have received had no such deductions been made, (ii) theBorrower shall make such deductions and (iii) the Borrower shall pay the fullamount deducted to the relevant taxation authority or other authority inaccordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or futurestamp or documentary taxes or any other excise or property taxes, charges orsimilar levies which arise from any payment made hereunder or under the Notes,if any, or from the execution, delivery or registration of, or otherwise withrespect to, this Agreement or the Notes, if any (hereinafter referred to as"Other Taxes").
(c) The Borrower will indemnify each Lender and the AdministrativeAgent for the full amount of Taxes or Other Taxes (including, withoutlimitation, any Taxes or Other Taxes imposed by any jurisdiction on amountspayable under this Section 2.14) paid by such Lender or the Administrative Agent(as the case may be) and any liability (including penalties to the extent notimposed as a result of such Lender's or the Administrative Agent's (as the case
may be) gross negligence or willful misconduct, interest and expenses) arisingtherefrom or with respect thereto, whether or not such Taxes or Other Taxes werecorrectly or legally asserted. This indemnification shall be made within 30 daysfrom the date such Lender or the Administrative Agent (as the case may be) makeswritten demand therefor.
(d) Within 30 days after the date of any payment of Taxes, theBorrower will furnish to the Administrative Agent, at its address referred to inSection 8.02, the original or a certified copy of a receipt evidencing paymentthereof.
(e) Each Lender that is not created or organized under the laws ofthe United States or a political subdivision thereof shall deliver to theBorrower and the Administrative Agent on or prior to the date of its executionand delivery of this Agreement, and each such Lender that is not a party heretoon the date hereof shall deliver to the Borrower and the Administrative Agent onor prior to the date on which such Lender becomes a Lender pursuant to Section2.19 or 8.07 (as the case may be), a true and accurate certificate executed induplicate by a duly authorized officer of such Lender in substantially the formset out in Exhibit D-1 or D-2 hereto, as applicable, to the effect that suchLender is eligible under the provisions of an applicable tax treaty concluded bythe United States (in which case the certificate shall be accompanied by twoexecuted copies of Form 1001 (or any successor or substitute form or forms) ofthe Internal Revenue Service (the "IRS") of the United States), or under Section1441(c) or 1442 of the Internal Revenue Code (in which case the certificateshall be accompanied by two copies of IRS Form 4224 (or any successor orsubstitute form or forms) of the IRS), to receive, as of
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the date hereof or as of the date such party becomes a Lender hereto pursuant toSection 2.19 or 8.07 (as the case may be), as appropriate, payments hereunderwithout deduction or withholding of United States federal income tax. Each suchLender further agrees to deliver to the Borrower and the Administrative Agentfrom time to time, as reasonably requested by the Borrower or the AdministrativeAgent, and in any case before or promptly upon the occurrence of any eventsrequiring a change in the most recent certificate previously delivered pursuantto this Section 2.14(e), a true and accurate certificate executed in duplicateby a duly authorized officer of such Lender in substantially the form set out inExhibit D-1 or D-2 hereto, as applicable. Further, each Lender that delivers acertificate in the form set out in Exhibit D-1 hereto agrees, to the extentpermitted by law, to deliver to the Borrower and the Administrative Agent within15 days prior to every third anniversary of the date of delivery of the initialIRS Form 1001 by such Lender (or more often if required by law) on which thisAgreement is still in effect, two accurate and complete original signed copiesof IRS Form 1001 (or any successor or substitute form or forms required underthe Internal Revenue Code or the applicable regulations promulgated thereunder)and a certificate in the form set out in such Exhibit D-1, and each Lender thatdelivers a certificate in the form set out in Exhibit D-2 hereto agrees todeliver to the Borrower and the Administrative Agent, to the extent permitted by
law, within 15 days prior to the beginning of each subsequent taxable year ofsuch Lender (or more often if required by law) during which this Agreement isstill in effect, two accurate and complete original signed copies of IRS Form4224 (or any successor or substitute form or forms required under the InternalRevenue Code or the applicable regulations promulgated thereunder) and acertificate in the form of such Exhibit D-2. Each such certificate shallcertify as to one of the following:
(i) that such Lender is eligible to receive payments hereunderwithout deduction or withholding of United States federal income tax;
(ii) that such Lender is not eligible to receive payments hereunderwithout deduction or withholding of United States federal income tax asspecified therein but does not require additional payments thereforpursuant to Section 2.14(a) or (c) because it is eligible and able torecover the full amount of any such deduction or withholding from a sourceother than the Borrower; or
(iii) that such Lender is not eligible to receive payments hereunderwithout deduction or withholding of United States federal income tax asspecified therein and that it is not eligible and able to recover the fullamount of the same from a source other than the Borrower.
If any form or document referred to in this subsection (e) requires thedisclosure of information, other than information necessary to compute the taxpayable and information required on the date hereof by IRS Form 1001 or 4224,that any Lender reasonably considers to be confidential, such Lender promptlyshall give notice thereof to the Borrower and the Administrative Agent and shallnot be obligated to include in such form or document such confidentialinformation; provided that such Lender certifies to the Borrower that thefailure to disclose such confidential information does not increase theobligations of the Borrower under this Section 2.14.
(f) Without prejudice to the survival of any other agreement of theBorrower hereunder, the agreements and obligations of the Borrower contained inthis Section 2.14 shall survive the payment in full of principal and interest onall Advances and the termination of this Agreement until
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such date as all applicable statutes of limitations (including any extensionsthereof) have expired with respect to such agreements and obligations of theBorrower contained in this Section 2.14.
SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain any------------------------
payment (whether voluntary, involuntary, through the exercise of any right ofset-off, or otherwise) on account of the Advances made by it (other thanpursuant to Section 2.07, 2.11, 2.14, 8.04 or 8.08) in excess of its ratableshare of payments on account of the Advances obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations inthe Advances made by them as shall be necessary to cause such purchasing Lenderto share the excess payment ratably with each of them, provided, however, thatif all or any portion of such excess payment is thereafter recovered from suchpurchasing Lender, such purchase from each Lender shall be rescinded and suchLender shall repay to the purchasing Lender the purchase price to the extent ofsuch recovery, together with an amount equal to such Lender's ratable share(according to the proportion of (i) the amount of such Lender's requiredrepayment to (ii) the total amount so recovered from the purchasing Lender) ofany interest or other amount paid or payable by the purchasing Lender in respectof the total amount so recovered. The Borrower agrees that any Lender sopurchasing a participation from another Lender pursuant to this Section 2.15may, to the fullest extent permitted by law, exercise all its rights of payment(including the right of set-off) with respect to such participation as fully asif such Lender were the direct creditor of the Borrower in the amount of suchparticipation.
SECTION 2.16. Mandatory Assignment by a Lender; Mitigation. If any Lender--------------------------------------------
requests from the Borrower either payment of additional interest on EurodollarRate Advances pursuant to Section 2.07, or reimbursement for increased costspursuant to Section 2.11, or payment of or reimbursement for Taxes pursuant toSection 2.14, or if any Lender notifies the Administrative Agent that it isunlawful for such Lender or its Eurodollar Lending Office to perform itsobligations hereunder pursuant to Section 2.12, (i) such Lender will, upon threeBusiness Days' notice by the Borrower to such Lender and the AdministrativeAgent, to the extent not inconsistent with such Lender's internal policies andapplicable legal and regulatory restrictions, use reasonable efforts to make,fund or maintain its Eurodollar Rate Advances through another Eurodollar LendingOffice of such Lender if (A) as a result thereof the additional amounts requiredto be paid pursuant to Section 2.07, 2.11 or 2.14, as applicable, in respect ofsuch Eurodollar Rate Advances would be materially reduced or the provisions ofSection 2.12 would not apply to such Lender, as applicable, and (B) asdetermined by such Lender in good faith but in its sole discretion, the makingor maintaining of such Eurodollar Rate Advances through such other EurodollarLending Office would not otherwise materially and adversely affect suchEurodollar Rate Advances or such Lender and (ii) unless such Lender hastheretofore taken steps to remove or cure, and has removed or cured, theconditions creating such obligation to pay such additional amounts or thecircumstances described in Section 2.12, the Borrower may designate an EligibleAssignee to purchase for cash (pursuant to an Assignment and Acceptance) all,but not less than all, of the Advances then owing to such Lender and all, butnot less than all, of such Lender's rights and obligations hereunder, withoutrecourse to or warranty by, or expense to, such Lender, for a purchase priceequal to the outstanding principal amount of each such Advance then owing tosuch Lender plus any accrued but unpaid interest thereon and any accrued butunpaid facility fees owing thereto and, in addition, (A) all additional costsreimbursements, expense reimbursements and indemnities, if any, owing in respectof such Lender's Commitment hereunder, and all other accrued and unpaid amountsowing to such Lender hereunder, at such time shall be paid to such Lender and(B) if such Eligible Assignee is not otherwise a Lender at such time, the
applicable processing and recordation fee under Section 8.07(a) for suchassignment shall have been paid.
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SECTION 2.17. Evidence of Debt. (a) Each Lender shall maintain in----------------
accordance with its usual practice an account or accounts evidencing theindebtedness of the Borrower to such Lender resulting from each Advance owing tosuch Lender from time to time, including the amounts of principal and interestpayable and paid to such Lender from time to time hereunder. The Borroweragrees that upon notice by any Lender to the Borrower (with a copy of suchnotice to the Administrative Agent) to the effect that a promissory note orother evidence of indebtedness is required or appropriate in order for suchLender to evidence (whether for purposes of pledge, enforcement or otherwise)the Advances owing to, or to be made by, such Lender, the Borrower shallpromptly execute and deliver to such Lender a promissory note or other evidenceof indebtedness, in form and substance reasonably satisfactory to the Borrowerand such Lender (each a "Note"), payable to the order of such Lender in aprincipal amount equal to the Commitment of such Lender; provided, however, thatthe execution and delivery of such promissory note or other evidence ofindebtedness shall not be a condition precedent to the making of any Advanceunder this Agreement.
(b) The Register maintained by the Administrative Agent pursuant to Section8.07(c) shall include a control account, and a subsidiary account for eachLender, in which accounts (taken together) shall be recorded (i) the date andamount of each Borrowing made hereunder, the Type of Advances comprising suchBorrowing and, if appropriate, the Interest Period applicable thereto, (ii) theterms of each Assumption Agreement and each Assignment and Acceptance deliveredto and accepted by it, (iii) the amount of any principal or interest due andpayable or to become due and payable from the Borrower to each Lender hereunder,and (iv) the amount of any sum received by the Administrative Agent from theBorrower hereunder and each Lender's share thereof.
(c) Entries made in good faith by the Administrative Agent in the Registerpursuant to subsection (b) above, and by each Lender in its account or accountspursuant to subsection (a) above, shall be prima facie evidence of the amount ofprincipal and interest due and payable or to become due and payable from theBorrower to, in the case of the Register, each Lender and, in the case of suchaccount or accounts, such Lender, under this Agreement, absent manifest error;provided, however, that the failure of the Administrative Agent or such Lenderto make an entry, or any finding that an entry is incorrect, in the Register orsuch account or accounts shall not limit or otherwise affect the obligations ofthe Borrower under this Agreement.
SECTION 2.18. Use of Proceeds. The proceeds of the Advances shall be---------------
available (and the Borrower agrees that it shall use such proceeds) to supportthe obligations of the Borrower in respect of commercial paper issued by the
Borrower and/or for other general corporate purposes of the Borrower and itssubsidiaries.
SECTION 2.19. Extension of Termination Date. (a) At least 45 days but-----------------------------
not more than 60 days prior to the Revolver Termination Date in effect at anytime, the Borrower, by written notice to the Administrative Agent, may requestan extension of the Revolver Termination Date in effect at such time for aperiod of 364 days from its then scheduled expiration; provided, however, thatthe Borrower shall not have made the Term Loan Election for Advances outstandingon such Revolver Termination Date prior to the then scheduled RevolverTermination Date. The Administrative Agent shall promptly notify each Lender ofsuch request, and each Lender shall in turn, in its sole discretion, not earlierthan 30 days but at least 20 days prior to such Revolver Termination Date,notify the Borrower and the Administrative Agent in writing as to whether suchLender will consent to such extension. If any Lender
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shall fail to notify the Administrative Agent and the Borrower in writing of itsconsent to any such request for extension of the Revolver Termination Date atleast 20 days prior to the scheduled occurrence thereof at such time, suchLender shall be deemed to be a Non-Consenting Lender with respect to suchrequest. The Administrative Agent shall notify the Borrower not later than 15days prior to the scheduled Revolver Termination Date in effect at such time ofthe decision of the Lenders regarding the Borrower's request for an extension ofthe Revolver Termination Date.
(b) If all of the Lenders consent in writing to any such request inaccordance with subsection (a) of this Section 2.19, the Revolver TerminationDate shall, effective as at the Revolver Termination Date otherwise in effect atsuch time (the "Extension Date"), be extended for a period of 364 days from suchExtension Date; provided that on each Extension Date, no Event of Default, orevent that with the giving of notice or passage of time or both would constitutean Event of Default, shall have occurred and be continuing, or shall occur as aconsequence thereof. If Lenders holding at least a majority in interest of theaggregate Commitments at such time consent in writing to any such request inaccordance with subsection (a) of this Section 2.19, the Revolver TerminationDate in effect at such time shall, effective as at the applicable ExtensionDate, be extended as to those Lenders that so consented (each a "ConsentingLender") but shall not be extended as to any other Lender (each a "Non-Consenting Lender"). To the extent that the Revolver Termination Date is notextended as to any Lender pursuant to this Section 2.19 and the Commitment ofsuch Lender is not assumed in accordance with subsection (c) of this Section2.19 on or prior to the applicable Extension Date, the Commitment of such Non-Consenting Lender shall automatically terminate in whole on such unextendedRevolver Termination Date without any further notice or other action by theBorrower, such Lender or any other Person; provided that such Non-ConsentingLender's rights under Sections 2.11, 2.14, 8.04 and 8.08, and its obligationsunder Section 7.05, shall survive the Revolver Termination Date for such Lender
as to matters occurring prior to such date. It is understood and agreed that noLender shall have any obligation whatsoever to agree to any request made by theBorrower for any requested extension of the Revolver Termination Date.
(c) If Lenders holding at least a majority in interest of the aggregateCommitments at any time consent to any such request pursuant to subsection (a)of this Section 2.19, the Borrower may arrange for one or more ConsentingLenders or other Eligible Assignees (each such Eligible Assignee that accepts anoffer to assume a Non-Consenting Lender's Commitment as of the applicableExtension Date being an "Assuming Lender") to assume, effective as of theExtension Date, any Non-Consenting Lender's Commitment and all of theobligations of such Non-Consenting Lender under this Agreement thereafterarising, without recourse to or warranty by, or expense to, such Non-ConsentingLender; provided, however, that the amount of the Commitment of any suchAssuming Lender as a result of such substitution shall in no event be less than$25,000,000 unless the amount of the Commitment of such Non-Consenting Lender isless than $25,000,000, in which case such Assuming Lender shall assume all ofsuch lesser amount; and provided further that:
(i) any such Consenting Lender or Assuming Lender shall have paid tosuch Non-Consenting Lender (A) the aggregate principal amount of, and anyinterest accrued and unpaid to the effective date of the assignment on, theoutstanding Advances, if any, of such Non-Consenting Lender plus (B) anyaccrued but unpaid facility fees owing to such Non-Consenting Lender as ofthe effective date of such assignment;
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(ii) all additional costs reimbursements, expense reimbursements andindemnities payable to such Non-Consenting Lender, and all other accruedand unpaid amounts owing to such Non-Consenting Lender hereunder, as of theeffective date of such assignment shall have been paid to such Non-Consenting Lender; and
(iii) with respect to any such Assuming Lender, the applicableprocessing and recordation fee required under Section 8.07(a) for suchassignment shall have been paid;
provided further that such Non-Consenting Lender's rights under Sections 2.11,2.14, 8.04 and 8.08, and its obligations under Section 7.05, shall survive suchsubstitution as to matters occurring prior to the date of substitution. Atleast three Business Days prior to any Extension Date, (A) each such AssumingLender, if any, shall have delivered to the Borrower and the AdministrativeAgent an assumption agreement, in form and substance satisfactory to theBorrower and the Administrative Agent (an "Assumption Agreement"), duly executedby such Assuming Lender, such Non-Consenting Lender, the Borrower and theAdministrative Agent, (B) any such Consenting Lender shall have deliveredconfirmation in writing satisfactory to the Borrower and the AdministrativeAgent as to the increase in the amount of its Commitment and (C) each Non-Consenting Lender being replaced pursuant to this Section 2.19 shall have
delivered to the Administrative Agent any Note or Notes held by such Non-Consenting Lender. Upon the payment or prepayment of all amounts referred to inclauses (i), (ii) and (iii) of the immediately preceding sentence, each suchConsenting Lender or Assuming Lender, as of the Extension Date, will besubstituted for such Non-Consenting Lender under this Agreement and shall be aLender for all purposes of this Agreement, without any further acknowledgment byor the consent of the other Lenders, and the obligations of each such Non-Consenting Lender hereunder shall, by the provisions hereof, be released anddischarged.
(d) If all of the Lenders (after giving effect to any assignmentspursuant to subsection (b) of this Section 2.19) consent in writing to arequested extension (whether by execution or delivery of an Assumption Agreementor otherwise) not later than one Business Day prior to such Extension Date, theAdministrative Agent shall so notify the Borrower, and, so long as no Event ofDefault, or event that with the giving of notice or passage of time or bothwould constitute an Event of Default, shall have occurred and be continuing asof such Extension Date, or shall occur as a consequence thereof, the RevolverTermination Date then in effect shall be extended for the 364-day perioddescribed in subsection (a) of this Section 2.19, and all references in thisAgreement, and in the Notes, if any, to the " Revolver Termination Date" shall,with respect to each Consenting Lender and each Assuming Lender for suchExtension Date, refer to the Revolver Termination Date as so extended. Promptlyfollowing each Extension Date, the Administrative Agent shall notify the Lenders(including, without limitation, each Assuming Lender) of the extension of thescheduled Revolver Termination Date in effect immediately prior thereto andshall thereupon record in the Register the relevant information with respect toeach such Consenting Lender and each such Assuming Lender.
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ARTICLE IIICONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01.-----------------------------------------------------
Section 2.01 of this Agreement shall become effective on and as of the firstdate (the "Effective Date") on which all of the following conditions precedenthave been satisfied or waived in accordance with Section 8.01:
(a) the Administrative Agent shall have received on or before theEffective Date the following, each dated the Effective Date, in form andsubstance satisfactory to the Administrative Agent: (i) certified copiesof the resolutions of the Board of Directors of the Borrower or theExecutive Committee of such Board authorizing the execution and delivery ofthis Agreement, and approving all documents evidencing other necessarycorporate action and governmental approvals, if any, with respect to thisAgreement; (ii) a certificate of the Secretary or an Assistant Secretary ofthe Borrower certifying the name and true signature of the officer of the
Borrower executing this Agreement on its behalf; (iii) an opinion of DavidK. Thompson, Esq., Senior Vice President-Assistant General Counsel of theBorrower, in substantially the form of Exhibit C hereto; and (iv) anopinion of Shearman & Sterling, counsel for the Administrative Agent.
(b) all consents and approvals of any governmental or regulatoryauthority and any other third party necessary in connection with thisAgreement or the consummation of the transactions contemplated hereby shallhave been obtained and shall remain in effect.
(c) there shall have occurred no material adverse change in thebusiness, financial condition or operations of (i) Disney and itssubsidiaries, taken as a whole, since September 30, 1995, except asdisclosed in periodic or other reports filed by Disney and its subsidiariesduring the period from September 30, 1995 to the date of this Agreementpursuant to Section 13 of the Securities Exchange Act of 1934, as amended,copies of which have been furnished to the Initial Lenders prior to thedate of this Agreement, or (ii) the Borrower and its subsidiaries, taken asa whole, since June 30, 1996, except as disclosed in reports filed by theBorrower and its subsidiaries, if any, during the period from June 30, 1996to the date of this Agreement pursuant to Section 13 of the SecuritiesExchange Act of 1934, as amended, copies of which have been furnished tothe Initial Lenders prior to the date of this Agreement.
(d) the Borrower shall have paid or prepaid all amounts owing underthe Existing Credit Agreements, and all commitments of the lendersthereunder shall have been terminated.
(e) the Borrower shall have notified each Lender and theAdministrative Agent in writing as to the proposed Effective Date at leastthree Business Days prior to the occurrence thereof.
(f) all of the representations and warranties contained in Section4.01 shall be correct in all material respects on and as of the EffectiveDate, before and after giving effect to such date, as though made on and asof the Effective Date (except to the extent that such representations andwarranties relate to an earlier date, in which case such representationsand warranties shall have been correct in all material respects on and asof such earlier date).
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(g) no event shall have occurred and be continuing, or shall resultfrom the occurrence of the Effective Date, that constitutes an Event ofDefault or would constitute an Event of Default but for the requirementthat notice be given or time elapse or both.
SECTION 3.02. Conditions Precedent to Each Borrowing. The obligation--------------------------------------
of each Lender to make an Advance on the occasion of each Borrowing (including
the initial Borrowing) shall be subject to the further conditions precedent thatthe Effective Date shall have occurred and on the date of such Borrowing thefollowing statements shall be true (and each of the giving of the applicableNotice of Borrowing and the acceptance by the Borrower of the proceeds of suchBorrowing shall constitute a representation and warranty by the Borrower that onthe date of such Borrowing such statements are true):
(a) the representations and warranties contained in Section 4.01 arecorrect in all material respects on and as of the date of such Borrowing,before and after giving effect to such Borrowing and to the application ofthe proceeds therefrom, as though made on and as of such date (except tothe extent that such representations and warranties relate to an earlierdate, in which case such representations and warranties shall have beencorrect in all material respects on and as of such earlier date); and
(b) no event has occurred and is continuing, or would result from suchBorrowing or from the application of the proceeds therefrom, whichconstitutes an Event of Default or would constitute an Event of Default butfor the requirement that notice be given or time elapse or both.
SECTION 3.03. Determinations Under Section 3.01. For purposes of---------------------------------
determining compliance with the conditions specified in Section 3.01, eachLender shall be deemed to have consented to, approved or accepted or to besatisfied with each document or other matter required thereunder to be consentedto or approved by or acceptable or satisfactory to the Lenders unless an officerof the Administrative Agent responsible for the transactions contemplated bythis Agreement shall have received notice from such Lender prior to the datethat the Borrower, by notice to the Lenders, designates as the proposedEffective Date, specifying its objection thereto. The Administrative Agentshall promptly notify the Lenders of the occurrence of the Effective Date.
ARTICLE IVREPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The----------------------------------------------
Borrower represents and warrants as of the Effective Date and from time to timethereafter as required under this Agreement as follows:
(a) The Borrower is a corporation duly organized, validly existing andin good standing under the laws of the State of Delaware. The Borrower andeach of the Significant Subsidiaries are duly qualified and in goodstanding as foreign corporations authorized to do business in eachjurisdiction (other than the respective jurisdictions of theirincorporation) in which the nature of their respective activities or thecharacter of the properties they own or lease make such qualificationnecessary and in which the failure so to qualify would have a material
adverse effect on the financial condition or operations of the Borrower andits subsidiaries, taken as a whole.
(b) The execution, delivery and performance by the Borrower of thisAgreement and each of the Notes, if any, delivered hereunder are within theBorrower's corporate powers, have been duly authorized by all necessarycorporate action, and do not contravene (i) the Borrower's charter or by-laws or (ii) any law, rule, regulation, order, writ, judgment, injunction,decree, determination or award or any material contractual restrictionbinding on or affecting the Borrower, Disney or ABC; no authorization orapproval or other action by, and no notice to or filing with, anygovernmental authority or regulatory body is required for the dueexecution, delivery and performance by the Borrower of this Agreement orthe Notes, if any; and this Agreement is and each of the Notes, whendelivered hereunder, will be the legal, valid and binding obligation of theBorrower, enforceable against the Borrower in accordance with theirrespective terms, subject to applicable bankruptcy, reorganization,insolvency, moratorium or similar laws affecting creditors' rightsgenerally and general principles of equity.
(c) (i) At any time prior to the date on which the Borrower firstdelivers the audited financial statements of the Borrower and itssubsidiaries pursuant to Section 5.01(d)(ii), Disney's most recent annualreport on Form 10-K containing the consolidated balance sheet of Disney andits subsidiaries, and the related consolidated statements of income and ofcash flows of Disney and its subsidiaries, copies of which have beenfurnished to each Initial Lender prior to the date of this Agreement,fairly present the consolidated financial condition of Disney and itssubsidiaries as at the date of such balance sheet and the consolidatedresults of operations of Disney and its subsidiaries for the fiscal yearended on such date, all in accordance with generally accepted accountingprinciples consistently applied, and (ii) at any time thereafter, theBorrower's most recent annual report on Form 10-K containing theconsolidated balance sheet of the Borrower and its subsidiaries, and therelated consolidated statements of income and of cash flows of the Borrowerand its subsidiaries, copies of which have been furnished to each Lenderpursuant to Section 5.01(d)(ii), fairly present the consolidated financialcondition of the Borrower and its subsidiaries as at the date of suchbalance sheet and the consolidated results of operations of the Borrowerand its subsidiaries for the fiscal year ended on such date, all inaccordance with generally accepted accounting principles consistentlyapplied.
(d) There is no pending or, to the Borrower's knowledge, threatenedclaim, action or proceeding affecting the Borrower or any of itssubsidiaries which could reasonably be expected to adversely affect thefinancial condition or operations of the Borrower and its subsidiaries,taken as a whole, or which could reasonably be expected to affect the
legality, validity or enforceability of this Agreement; and to theBorrower's knowledge, the Borrower and each of its subsidiaries havecomplied, and are in compliance, with all applicable laws, rules,regulations, permits, orders, consent decrees and judgments, except for anysuch matters which have not had, and would not reasonably be expected tohave, a material adverse effect on the financial condition or operations ofthe Borrower and its subsidiaries, taken as a whole.
(e) The Borrower and the ERISA Affiliates have not incurred and arenot reasonably expected to incur any material liability in connection withtheir Single Employer Plans or Multiple Employer Plans, other than ordinaryliabilities for benefits; neither the Borrower nor any ERISA Affiliate hasincurred or is reasonably expected to incur any material withdrawal
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liability (as defined in Part I of Subtitle E of Title IV of ERISA) to anyMultiemployer Plan; and no Multiemployer Plan of the Borrower or any ERISAAffiliate is reasonably expected to be in reorganization or to be terminated,within the meaning of Title IV of ERISA.
SECTION 4.02. Additional Representations and Warranties of the Borrower---------------------------------------------------------
as of Each Extension Date. The Borrower represents and warrants on each-------------------------Extension Date (and at no other time) that, as of each such date, the followingstatements shall be true:
(a) there has been no material adverse change in the business,financial condition or operations of the Borrower and its subsidiaries, takenas a whole, since the date of the audited financial statements of theBorrower and its subsidiaries most recently delivered to the Lenders pursuantto Section 5.01(d)(ii) prior to the applicable Extension Date (except asdisclosed in periodic or other reports filed by the Borrower and itssubsidiaries pursuant to Section 13 of the Securities Exchange Act of 1934,as amended, during the period from the date of the most recently deliveredaudited financial statements of the Borrower and its subsidiaries pursuant toSection 5.01(d)(ii) to the date of the request for an extension of theRevolver Termination Date then in effect related to such Extension Date); and
(b) the representations and warranties contained in Section 4.01 arecorrect in all material respects on and as of such date, as though made onand as of such date (except to the extent that such representations andwarranties relate to an earlier date, in which case such representations andwarranties shall have been correct in all material respects on and as of suchearlier date).
SECTION 5.01. Affirmative Covenants. So long as any Advance shall---------------------
remain unpaid or any Lender shall have any Commitment hereunder, the Borrowerwill, unless the Majority Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its-------------------------
subsidiaries to comply, in all material respects with all applicable laws,rules, regulations, permits, orders, consent decrees and judgments binding onthe Borrower and its subsidiaries the failure with which to comply would havea material adverse effect on the financial condition or operations of theBorrower and its subsidiaries, taken as a whole.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its---------------------
subsidiaries to pay and discharge, before the same shall become delinquent,if the failure to so pay and discharge would have a material adverse effecton the financial condition or operations of the Borrower and itssubsidiaries, taken as a whole, (i) all taxes, assessments and governmentalcharges or levies imposed upon it or upon its property, and (ii) all lawfulclaims which, if unpaid, will by law become a Lien upon its property;provided, however, that neither the Borrower nor any of its subsidiariesshall be required to pay or discharge any such tax, assessment, charge, levyor claim which is being contested in good faith and by proper proceedings andas to which appropriate reserves are being maintained in accordance withGAAP.
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(c) Preservation of Corporate Existence, Etc. Subject to Section----------------------------------------
5.02(a), preserve and maintain, and cause each of Disney and ABC to preserveand maintain, its corporate existence, rights (charter and statutory) andfranchises; provided, however, that none of the Borrower, Disney or ABC shallbe required to preserve any right or franchise if the loss thereof would nothave a material adverse effect on the business, financial condition oroperations of the Borrower and its subsidiaries, taken as a whole; andprovided further, however, that neither Disney nor ABC shall be required topreserve its corporate existence if the loss thereof would not have amaterial adverse effect on the business, financial condition or operations ofthe Borrower and its subsidiaries, taken as a whole.
(d) Reporting Requirements. Furnish to the Administrative Agent, on----------------------
behalf of the Lenders:
(i) as soon as available and in any event within 50 days afterthe end of each of the first three quarters of each fiscal year of theBorrower, the Borrower's quarterly report to shareholders on Form 10-Q as
filed with the Securities and Exchange Commission (the "SEC"), in eachcase containing a consolidated balance sheet of the Borrower and itssubsidiaries as of the end of such quarter and consolidated statements ofincome and of cash flows of the Borrower and its subsidiaries for theperiod commencing at the end of the previous fiscal year and ending withthe end of such quarter, and a certificate of any of the Borrower'sChairman of the Board of Directors, President, Chief Financial Officer,Treasurer, Assistant Treasurer or Controller stating that no Event ofDefault, or event that with the giving of notice or passage of time orboth, would constitute an Event of Default, has occurred and iscontinuing;
(ii) as soon as soon as available and in any event within 100days after the end of each fiscal year of the Borrower, a copy of theBorrower's annual report to shareholders on Form 10-K as filed with theSEC, in each case containing consolidated financial statements of theBorrower and its subsidiaries for such year and a certificate of any ofthe Borrower's Chairman of the Board of Directors, President, ChiefFinancial Officer, Treasurer, Assistant Treasurer or Controller statingthat no Event of Default, or event that with the giving of notice orpassage of time or both would constitute an Event of Default, hasoccurred and is continuing;
(iii) promptly after the Borrower obtains actual knowledge ofthe occurrence of each Event of Default, and each event that with thegiving of notice or passage of time or both would constitute an Event ofDefault, a statement of any of the Borrower's Chairman of the Board ofDirectors, President, Chief Financial Officer, Treasurer, AssistantTreasurer or Controller setting forth details of such Event of Default orevent continuing on the date of such statement, and the action which theBorrower has taken and proposes to take with respect thereto;
(iv) promptly after the commencement thereof, notice of anyactions, suits and proceedings before any court or governmentaldepartment, commission, board, bureau, agency or instrumentality,domestic or foreign, affecting the Borrower or any of its subsidiaries ofthe type described in Section 4.01(d);
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(v) promptly after the Borrower obtains actual knowledgethereof, written notice of any pending or threatened Environmental Claimagainst the Borrower or any of its subsidiaries or any of theirrespective properties which could reasonably be expected to materiallyand adversely affect the financial condition or operations of theBorrower and its subsidiaries, taken as a whole;
(vi) promptly after the Borrower obtains actual knowledge of theoccurrence of any ERISA Event which could reasonably be expected tomaterially and adversely affect the financial condition or operations of
the Borrower and its subsidiaries, taken as a whole, a statement of anyof the Borrower's Chairman of the Board of Directors, President, ChiefFinancial Officer, Treasurer, Assistant Treasurer or Controllerdescribing such ERISA Event and the action, if any, which the Borrowerhas taken and proposes to take with respect thereto;
(vii) promptly after receipt thereof by the Borrower or any ERISAAffiliate from the sponsor of a Multiemployer Plan, a copy of each noticereceived by the Borrower or any ERISA Affiliate concerning (A) theimposition of withdrawal liability (as defined in Part I of Subtitle E ofTitle IV of ERISA) by a Multiemployer Plan, which withdrawal liabilitycould reasonably be expected to materially and adversely affect thefinancial condition or operations of the Borrower and its subsidiaries,taken as a whole, (B) the reorganization or termination, within themeaning of Title IV of ERISA, of any Multiemployer Plan, whichreorganization or termination could reasonably be expected to materiallyadversely affect the financial condition or operations of the Borrowerand its subsidiaries, taken as a whole, or (C) the amount of liabilityincurred, or which may be incurred, by the Borrower or any ERISAAffiliate in connection with any event described in subclause (vii)(A) or(vii)(B) above; and
(viii) such other material information reasonably related toany Lender's credit analysis of the Borrower or any of its subsidiariesas any Lender through the Administrative Agent may from time to timereasonably request.
SECTION 5.02. Negative Covenant. So long as any Advance shall remain-----------------
unpaid or any Lender shall have any Commitment hereunder, the Borrower will not,without the written consent of the Majority Lenders:
(a) Mergers, Etc. Merge or consolidate with or into, or convey,------------
transfer, lease or otherwise dispose of (whether in one transaction or in aseries of transactions) all or substantially all of the assets of theBorrower and its subsidiaries, taken as a whole (whether now owned orhereafter acquired), to, any Person, or permit any of its subsidiaries to doso, unless (i) immediately after giving effect to such proposed transaction,no Event of Default or event that with the giving of notice or lapse of timeor both would constitute an Event of Default, would exist and (ii) in thecase of any such merger to which the Borrower is a party, the Borrower is thesurviving corporation or the Person into which the Borrower shall be mergedor formed by any such consolidation shall be a corporation organized andexisting under the laws of the United States or any State thereof and shallassume the Borrower's obligations hereunder and under the Notes, if any, inan agreement or instrument reasonably satisfactory in form and substance tothe Majority Lenders.
SECTION 6.01. Events of Default. If any of the following events ("Events-----------------
of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Advance whenthe same becomes due and payable; or the Borrower shall fail to pay anyinterest on any Advance or any fee or other amount payable under thisAgreement, in each case within three Business Days after such interest, feeor other amount becomes due and payable; or
(b) Any representation or warranty made by the Borrower herein or bythe Borrower (or any of its officers) delivered in writing and identified asdelivered in connection with this Agreement shall prove to have beenincorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe any covenantcontained in Section 5.01(d)(iii) or Section 5.02; or
(d) The Borrower shall fail to perform or observe any other term,covenant or agreement contained in this Agreement on its part to be performedor observed if the failure to perform or observe such other term, covenant oragreement shall remain unremedied for 30 days after written notice thereofshall have been given to the Borrower by the Administrative Agent or anyLender; or
(e) The Borrower or any of its subsidiaries shall fail to pay anyprincipal of or premium or interest on any Debt which is outstanding in aprincipal amount of at least $250,000,000 in the aggregate (but excludingDebt arising hereunder) of the Borrower or such subsidiary (as the case maybe), when the same becomes due and payable (whether by scheduled maturity,required prepayment, acceleration, demand or otherwise), and such failure (i)shall continue after the applicable grace period, if any, specified in theagreement or instrument relating to such Debt and (ii) shall not have beencured or waived; or any other event shall occur or condition shall existunder any agreement or instrument relating to any such Debt and shallcontinue after the applicable grace period, if any, specified in suchagreement or instrument, if the effect of such event or condition is toaccelerate, or to permit the acceleration of, the maturity of such Debt; orany such Debt shall be declared to be due and payable, or required to beprepaid (other than by a regularly scheduled required prepayment), redeemed,purchased or defeased, or an offer to prepay, redeem, purchase or defeasesuch Debt shall be required to be made, in each case prior to the statedmaturity thereof; or
(f) The Borrower or any Material Subsidiary shall generally not payits debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for thebenefit of creditors; or any proceeding shall be instituted by or against theBorrower or any Material Subsidiary seeking to adjudicate it a bankrupt orinsolvent, or seeking liquidation, winding up, reorganization, arrangement,adjustment, protection, relief, or composition of it or its debts under anylaw relating to bankruptcy, insolvency or reorganization or relief ofdebtors, or seeking the entry of an order for relief or the appointment
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of a receiver, trustee, custodian or other similar official for it or forsubstantially all of its property and, in the case of any such proceedinginstituted against it (but not instituted by it), either such proceedingshall remain undismissed or unstayed for a period of 60 days or any of theactions sought in such proceeding (including, without limitation, the entryof an order for relief against, or the appointment of a receiver, trustee,custodian or other similar official for, it or for any substantial part ofits property) shall occur; or the Borrower or any Material Subsidiary shalltake any corporate action to authorize any of the actions set forth above inthis subsection (f); or
(g) Any money judgment, writ or warrant of attachment or similarprocess against the Borrower, any Material Subsidiary or any of theirrespective assets involving in any case an amount in excess of $100,000,000is entered and shall remain undischarged, unvacated, unbonded or unstayed fora period of 30 days or, in any case, within five days of any pending sale ordisposition of any asset pursuant to any such process;
then, and in any such event, the Administrative Agent (i) shall at the request,or may with the consent, of the Majority Lenders, by notice to the Borrower,declare the obligation of each Lender to make Advances to be terminated,whereupon the same shall forthwith terminate, and (ii) shall at the request, ormay with the consent, of the Majority Lenders, by notice to the Borrower,declare the Advances, all interest thereon and all other amounts payable underthis Agreement to be forthwith due and payable, whereupon the Advances, all suchinterest and all such amounts shall become and be forthwith due and payable,without presentment, demand, protest or further notice of any kind, all of whichare hereby expressly waived by the Borrower; provided, however, that in theevent of an actual or deemed entry of an order for relief with respect to theBorrower under the Federal Bankruptcy Code, (A) the obligation of each Lender tomake Advances shall automatically be terminated and (B) the Advances, all suchinterest and all such amounts shall automatically become and be due and payable,without presentment, demand, protest or notice of any kind, all of which arehereby expressly waived by the Borrower.
ARTICLE VIITHE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. (a) Each Lender hereby
------------------------appoints and authorizes the Administrative Agent to take such action as agent onits behalf and to exercise such powers under this Agreement as are delegated tothe Administrative Agent by the terms hereof, together with such powers as arereasonably incidental thereto. As to any matters not expressly provided for bythis Agreement (including, without limitation, enforcement of this Agreement orcollection of the Advances), the Administrative Agent shall not be required toexercise any discretion or take any action, but shall be required to act or torefrain from acting (and shall be fully protected in so acting or refrainingfrom acting) upon the instructions of the Majority Lenders, and suchinstructions shall be binding upon all Lenders and all holders of Notes;provided, however, that the Administrative Agent shall not be required to takeany action which exposes the Administrative Agent to personal liability or whichis contrary to this Agreement or applicable law. The Administrative Agent agreesto give to each Lender prompt notice of each notice given to it by the Borrowerpursuant to the terms of this Agreement.
(b) The Co-Administrative Agents shall have no duties under thisAgreement other than those afforded to them in their capacities as Lenders, andeach Lender hereby acknowledges that the
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Co-Administrative Agents have no liability under this Agreement other than thoseassumed by them in their capacities as Lenders.
SECTION 7.02. Administrative Agent's Reliance, Etc. Neither the------------------------------------
Administrative Agent nor any of its directors, officers, agents or employeesshall be liable to any Lender for any action taken or omitted to be taken by itor them under or in connection with this Agreement, except for its or their owngross negligence or willful misconduct. Without limitation of the generality ofthe foregoing, the Administrative Agent: (i) may treat the Lender which madeany Advance as the holder of the Debt resulting therefrom until theAdministrative Agent receives and accepts an Assumption Agreement entered intoby an Assuming Lender as provided in Section 2.19, or an Assignment andAcceptance entered into by such Lender, as assignor, and an Eligible Assignee,as assignee, as provided in Section 8.07; (ii) may consult with legal counsel(including counsel for the Borrower), independent public accountants and otherexperts selected by it and shall not be liable for any action taken or omittedto be taken in good faith by it in accordance with the advice of such counsel,accountants or experts; (iii) makes no warranty or representation to any Lenderand shall not be responsible to any Lender for any statements, warranties orrepresentations (whether written or oral) made in or in connection with thisAgreement; (iv) shall not have any duty to ascertain or to inquire as to theperformance or observance of any of the terms, covenants or conditions of thisAgreement on the part of the Borrower or to inspect the property (including thebooks and records) of the Borrower; (v) shall not be responsible to any Lenderfor the due execution, legality, validity, enforceability, genuineness,sufficiency or value of this Agreement or any instrument or document furnished
pursuant hereto; and (vi) shall incur no liability under or in respect of thisAgreement by acting upon any notice, consent, certificate or other instrument orwriting (which may be by telecopier, telegram or telex) believed by it to begenuine and signed or sent by the proper party or parties.
SECTION 7.03. CUSA and Affiliates. With respect to its Commitment and-------------------
the Advances made by it and any Note or Notes issued to it, CUSA shall have thesame rights and powers under this Agreement as any other Lender and may exercisethe same as though it were not the Administrative Agent; and the term "Lender"or "Lenders" shall, unless otherwise expressly indicated, include CUSA in itsindividual capacity. CUSA and its respective Affiliates may accept depositsfrom, lend money to, act as trustee under indentures of, accept investmentbanking engagements from, and generally engage in any kind of business with, theBorrower, any of its subsidiaries and any Person who may do business with or ownsecurities of the Borrower or any such subsidiary, all as if CUSA was not theAdministrative Agent and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it----------------------
has, independently and without reliance upon the Administrative Agent or anyother Lender and based on the financial statements referred to in Section4.01(c)(i) and such other documents and information as it has deemedappropriate, made its own credit analysis and decision to enter into thisAgreement. Each Lender also acknowledges that it will, independently andwithout reliance upon the Administrative Agent or any other Lender and based onsuch documents and information as it shall deem appropriate at the time,continue to make its own credit decisions in taking or not taking action underthis Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the---------------
Administrative Agent (to the extent not reimbursed by the Borrower), ratablyaccording to the respective principal amounts of Advances then owing to each ofthem (or, if no Advances are at the time outstanding or if any Advances are thenowing to Persons which are not Lenders, ratably according to the respective
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amounts of their Commitments), from and against any and all liabilities,obligations, losses, damages, penalties, actions, judgments, suits, costs,expenses or disbursements of any kind or nature whatsoever which may be imposedon, incurred by, or asserted against the Administrative Agent in any wayrelating to or arising out of this Agreement or any action taken or omitted bythe Administrative Agent under this Agreement; provided that no Lender shall beliable for any portion of such liabilities, obligations, losses, damages,penalties, actions, judgments, suits, costs, expenses or disbursements resultingfrom the Administrative Agent's gross negligence or willful misconduct. Withoutlimitation of the foregoing, each Lender agrees to reimburse the AdministrativeAgent promptly upon demand for its ratable share of any out-of-pocket expenses
(including reasonable counsel fees) incurred by the Administrative Agent inconnection with the preparation, execution, delivery, administration,modification, amendment or enforcement (whether through negotiations, legal orbankruptcy proceedings or otherwise) of, or legal advice in respect of rights orresponsibilities under, this Agreement, to the extent that the AdministrativeAgent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Administrative Agent. The Administrative Agent------------------------------
may resign at any time by giving written notice thereof to the Lenders and theBorrower and such resignation shall be effective upon the appointment of asuccessor Administrative Agent as provided herein. Upon any such resignation,the Majority Lenders shall have the right to appoint a successor AdministrativeAgent. If no successor Administrative Agent shall have been so appointed by theMajority Lenders, and shall have accepted such appointment, within 30 days afterthe retiring Administrative Agent's giving of notice of resignation, then theretiring Administrative Agent may, on behalf of the Lenders, appoint a successorAdministrative Agent. Any successor Administrative Agent appointed hereundershall be a commercial bank organized or licensed under the laws of the UnitedStates or of any State thereof, or an Affiliate of any such commercial bank,having a combined capital and surplus of at least $500,000,000. Upon theacceptance of any appointment as Administrative Agent hereunder by a successorAdministrative Agent, such successor Administrative Agent shall thereuponsucceed to and become vested with all the rights, powers, discretion, privilegesand duties of the retiring Administrative Agent, and the retiring AdministrativeAgent shall be discharged from its duties and obligations under this Agreement.After any retiring Administrative Agent's resignation hereunder asAdministrative Agent, the provisions of this Article VII shall inure to itsbenefit as to any actions taken or omitted to be taken by it while it wasAdministrative Agent under this Agreement.
ARTICLE VIIIMISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision---------------
of this Agreement, nor consent to any departure by the Borrower therefrom, shallin any event be effective unless the same shall be in writing and signed by theMajority Lenders, and then such waiver or consent shall be effective only in thespecific instance and for the specific purpose for which given; provided,however, that no amendment, waiver or consent shall, unless in writing andsigned by all the Lenders (other than the Borrower or any of its Affiliates, ifa Lender, at the time of any such amendment, waiver or consent), do any of thefollowing: (a) waive any of the conditions specified in Section 3.01 or 3.02,(b) increase the Commitments of the Lenders or subject the Lenders to anyadditional obligations, (c) reduce the principal of, or interest on, theAdvances or the facility fees payable hereunder, (d) postpone any date fixed forany payment of principal of, or interest on, the Advances (other than asprovided in
Sections 2.05 and 2.19), (e) change the percentage of the Commitments or of theaggregate unpaid principal amount of Advances, or the number of Lenders, whichshall be required for the Lenders or any of them to take any action hereunder or(f) amend this Section 8.01; and provided, further, that no amendment, waiver orconsent shall, unless in writing and signed by the Administrative Agent inaddition to the Lenders required above to take such action, affect the rights orduties of the Administrative Agent under this Agreement or any Note.
SECTION 8.02. Notices, Etc. (a) All notices and other communications------------
provided for hereunder shall be, except as otherwise expressly provided forherein, in writing (including telecopier, telegraphic or telex communication)and mailed, telecopied, telegraphed, telexed or delivered, if to the Borrower,at its address at:
The Walt Disney Company500 South Buena Vista StreetBurbank, California 91521Attention: Assistant TreasurerTelecopy Number: (818) 563-1682 and (818) 562-1811;
with a copy to:
The Walt Disney Company500 South Buena Vista StreetBurbank, California 91521Attention: Corporate Legal DepartmentTelecopy Number: (818) 563-4160;
if to any Initial Lender, at its Domestic Lending Office specified opposite itsname on Schedule I hereto; if to any other Lender, at its Domestic LendingOffice specified in the Assumption Agreement or the Assignment and Acceptancepursuant to which it became a Lender, as the case may be; and if to theAdministrative Agent, at its address at:
Citicorp USA, Inc.One Court SquareLong Island City, New York 11120Attention: Kim ColeyTelecopy Number: (718) 248-4844
with a copy to:
Citicorp Securities, Inc.One Sansome StreetSan Francisco, California 94104Attention: Mark WilsonTelecopy Number: (415) 627-6355;
or, as to each party, at such other address as shall be designated by such partyin a written notice to the other parties. All such notices and communicationsshall, when mailed, telecopied, telegraphed or
36
telexed, be effective when deposited in the mails, telecopied, delivered to thetelegraph company or confirmed by telex answerback, respectively, except thatnotices and communications to the Administrative Agent pursuant to Article II orVII shall not be effective until received by the Administrative Agent. Deliveryby telecopier of an executed counterpart of any amendment or waiver of anyprovision of this Agreement or of any Exhibit hereto to be executed anddelivered hereunder shall be effective as delivery of a manually executedcounterpart thereof.
(b) If any notice required under this Agreement is permitted to bemade, and is made, by telephone, actions taken or omitted to be taken inreliance thereon by the Administrative Agent or any Lender shall be binding uponthe Borrower notwithstanding any inconsistency between the notice provided bytelephone and any subsequent writing in confirmation thereof provided to theAdministrative Agent or such Lender; provided that any such action taken oromitted to be taken by the Administrative Agent or such Lender shall have beenin good faith and in accordance with the terms of this Agreement.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender-------------------
or the Administrative Agent to exercise, and no delay in exercising, any righthereunder shall operate as a waiver thereof; nor shall any single or partialexercise of any such right preclude any other or further exercise thereof or theexercise of any other right. The remedies herein provided are cumulative andnot exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay,------------------
within five Business Days of demand, all actual and reasonable costs andexpenses, if any (including, without limitation, actual and reasonable counselfees and expenses), of the Administrative Agent and each Lender in connectionwith the enforcement (whether through legal proceedings or otherwise) of thisAgreement and the other instruments and documents to be delivered hereunder,including, without limitation, reasonable counsel fees and expenses inconnection with the enforcement of rights under this Section 8.04(a).
(b) If any payment of principal of, or Conversion of, any EurodollarRate Advance is made other than on the last day of the Interest Period for suchAdvance, as a result of a payment or Conversion pursuant to Section 2.08(f) or2.10 or acceleration of the maturity of the Advances pursuant to Section 6.01 orfor any other reason (other than by reason of a payment pursuant to Section2.12), the Borrower shall, within five Business Days of demand by any Lender(with a copy of such demand to the Administrative Agent), pay to such Lender any
amounts required to compensate such Lender for any additional losses, costs orexpenses which it may reasonably incur as a result of such payment orConversion, including, without limitation, any loss, cost or expense incurred byreason of the liquidation or reemployment of deposits or other funds acquired bysuch Lender to fund or maintain such Advance.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the----------------
continuance of any Event of Default and (ii) the making of the request or thegranting of the consent specified by Section 6.01 to authorize theAdministrative Agent to declare the Advances due and payable pursuant to theprovisions of Section 6.01, each Lender (and, in the case of CUSA, Citibank) ishereby authorized at any time and from time to time, to the fullest extentpermitted by law, to set off and apply any and all deposits (general or special,time or demand, provisional or final, but excluding trust accounts) at any timeheld and other indebtedness at any time owing by such Lender (and, in the caseof CUSA, Citibank) to or for the credit or the account of the Borrower againstany and all of the obligations of the Borrower now or hereafter existing underthis Agreement, whether or not such Lender shall have made any demand
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under this Agreement. Each Lender agrees promptly to notify the Borrower afterany such set-off and application made by such Lender (and, in the case of CUSA,Citibank); provided that the failure to give such notice shall not affect thevalidity of such set-off and application. The rights of each Lender (and, inthe case of CUSA, Citibank) under this Section are in addition to other rightsand remedies (including, without limitation, other rights of set-off) which suchLender may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective--------------
(other than Section 2.01, which shall only become effective upon satisfaction ofthe conditions precedent set forth in Section 3.01) when it shall have beenexecuted by the Borrower, the Administrative Agent and each Co-AdministrativeAgent and when the Administrative Agent shall have been notified by each InitialLender that such Initial Lender has executed it and, thereafter, shall bebinding upon and inure to the benefit of the Borrower, the Administrative Agent,each Co-Administrative Agent and each Lender and their respective successors andpermitted assigns, except that the Borrower shall not have the right to assignits rights hereunder or any interest herein without the prior written consent ofthe Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender may and,------------------------------
if requested by the Borrower upon notice by the Borrower delivered to suchLender and the Administrative Agent pursuant to clause (ii) of Section 2.16,will, assign to one or more Eligible Assignees all or a portion of its rightsand obligations under this Agreement (including, without limitation, all or aportion of its Commitment, the Advances owing to it and any Note or Notes held
by it); provided, however, that (i) each such assignment shall be of a constant,and not a varying, percentage of all rights and obligations under thisAgreement, (ii) the sum of (A) the amount of the Commitment of the assigningLender being assigned pursuant to each such assignment and (B) the amount of thecommitment being contemporaneously assigned under the Five-Year Credit Agreementby the Person that is such assigning Lender (in both cases determined as of thedate of the Assignment and Acceptance or similar agreement with respect to suchassignments) shall not be less than $50,000,000 in the aggregate (unless suchlesser amount is previously agreed among such assigning Lender, theAdministrative Agent and the Borrower), provided, however, that if the aggregateamount of the Commitment of such assigning Lender hereunder and its commitmentunder the Five-Year Credit Agreement is less than $50,000,000 on the date ofsuch proposed assignments, such assigning Lender may assign all, but not lessthan all, of its remaining rights and obligations under this Agreement and theFive-Year Credit Agreement (unless an assignment of a portion of such assigningLender's obligations hereunder and thereunder is otherwise previously agreedamong such assigning Lender, the Administrative Agent and the Borrower), (iii)each such assignment shall be to an Eligible Assignee, and (iv) the parties toeach such assignment (other than the Borrower) shall execute and deliver to theAdministrative Agent, for its acceptance and recording in the Register, anAssignment and Acceptance, together with a processing and recordation fee of$3,000. Upon such execution, delivery, acceptance and recording, from and afterthe effective date specified in each Assignment and Acceptance, (x) the assigneethereunder shall be a party hereto and, to the extent that rights andobligations hereunder have been assigned to it pursuant to such Assignment andAcceptance, have the rights and obligations of a Lender hereunder and (y) theLender assignor thereunder shall, to the extent that rights and obligationshereunder have been assigned by it pursuant to such Assignment and Acceptance,relinquish its rights (other than any rights such Lender assignor may have underSections 2.11, 2.14 and 8.08) and be released from its obligations under thisAgreement (and, in the case of an Assignment and Acceptance covering all or theremaining portion of an assigning Lender's rights and obligations under thisAgreement, such Lender shall cease to be a party hereto).
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(b) By executing and delivering an Assignment and Acceptance, theLender assignor thereunder and the assignee thereunder confirm to and agree witheach other and the other parties hereto as follows: (i) other than as providedin such Assignment and Acceptance, such assigning Lender makes no representationor warranty and assumes no responsibility with respect to any statements,warranties or representations made in or in connection with this Agreement orthe execution, legality, validity, enforceability, genuineness, sufficiency orvalue of this Agreement or any instrument or document furnished pursuant hereto;(ii) such assigning Lender makes no representation or warranty and assumes noresponsibility with respect to the financial condition of the Borrower or any ofits subsidiaries or the performance or observance by the Borrower of any of itsobligations under this Agreement or any instrument or document furnishedpursuant hereto; (iii) such assignee confirms that it has received a copy ofthis Agreement, together with copies of the financial statements referred to in
Section 4.01(c)(i) and such other documents and information as it has deemedappropriate to make its own credit analysis and decision to enter into suchAssignment and Acceptance; (iv) such assignee will, independently and withoutreliance upon the Administrative Agent, such assigning Lender or any otherLender and based on such documents and information as it shall deem appropriateat the time, continue to make its own credit decisions in taking or not takingaction under this Agreement; (v) such assignee confirms that it is an EligibleAssignee; (vi) such assignee appoints and authorizes the Administrative Agent totake such action as agent on its behalf and to exercise such powers under thisAgreement as are delegated to the Administrative Agent by the terms hereof,together with such powers as are reasonably incidental thereto; and (vii) suchassignee agrees that it will perform in accordance with their terms all of theobligations which by the terms of this Agreement are required to be performed byit as a Lender.
(c) The Administrative Agent shall maintain at its address referred toin Section 8.02 a copy of each Assignment and Acceptance and each AssumptionAgreement delivered to and accepted by it and a register for the recordation ofthe names and addresses of the Lenders and the Commitment of, and principalamount of the Advances owing to, each Lender from time to time (the "Register").The entries in the Register shall be conclusive and binding for all purposes,absent manifest error, and the Borrower, the Administrative Agent and theLenders may treat each Person whose name is recorded in the Register as a Lenderhereunder for all purposes of this Agreement. The Register shall be availablefor inspection by the Borrower or any Lender at any reasonable time and fromtime to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by anassigning Lender and an assignee representing that it is an Eligible Assigneeand, if applicable, the Borrower, together with any Note subject to suchassignment, the Administrative Agent shall, if such Assignment and Acceptancehas been completed and is in substantially the form of Exhibit B hereto, (i)accept such Assignment and Acceptance, (ii) record the information containedtherein in the Register and (iii) give prompt notice thereof to the Borrower.
(e) Each Lender may sell participations to one or more banks or otherentities in or to all or a portion of its rights and obligations under thisAgreement (including, without limitation, all or a portion of its Commitment andthe Advances owing to it); provided, however, that (i) such Lender's obligationsunder this Agreement (including, without limitation, its Commitment hereunder)shall remain unchanged, (ii) such Lender shall remain solely responsible to theother parties hereto for the performance of such obligations, (iii) theBorrower, the Administrative Agent and the other Lenders shall continue to dealsolely and directly with such Lender in connection with such Lender's rights andobligations under this Agreement, and (iv) such Lender shall not agree in anyparticipation agreement with any participant
39
or proposed participant to obtain the consent of such participant before
agreeing to the amendment, modification or waiver of any of the terms of thisAgreement or any Note, before consenting to any action or failure to act by theBorrower or any other party hereunder or under any Note, or before exercisingany rights it may have in respect thereof, unless such amendment, modification,waiver, consent or exercise would (A) increase the amount of such participant'sportion of such Lender's Commitment, (B) reduce the principal amount of or rateof interest on the Advances or any fee or other amounts payable hereunder towhich such participant would be entitled to receive a share under suchparticipation agreement, or (C) postpone any date fixed for any payment ofprincipal of or interest on the Advances or any fee or other amounts payablehereunder to which such participant would be entitled to receive a share undersuch participation agreement.
(f) Any Lender may, in connection with any assignment or participationor proposed assignment or participation pursuant to this Section 8.07, discloseto the assignee or participant or proposed assignee or participant, anyinformation relating to the Borrower furnished to such Lender by or on behalf ofthe Borrower in writing and directly related to the transactions contemplatedhereunder; provided that, prior to any such disclosure, the assignee orparticipant or proposed assignee or participant shall agree to preserve theconfidentiality of any confidential information relating to the Borrowerreceived by it from such Lender in accordance with the terms of Section 8.09.
(g) No participation or assignment hereunder shall be made in violationof the Securities Act of 1933, as amended from time to time, or any applicablestate securities laws, and each Lender hereby represents that it will make anyAdvance for its own account in the ordinary course of its business and not witha view to the public distribution or sale thereof.
(h) Anything in this Agreement to the contrary notwithstanding, anyLender may at any time create a security interest in all or any portion of itsrights under this Agreement (including, without limitation, the Advances owingto it and any Note issued to it hereunder) in favor of any Federal Reserve Bankin accordance with Regulation A of the Board of Governors of the Federal ReserveSystem (or any successor regulation thereto) and the applicable operatingcircular of such Federal Reserve Bank.
SECTION 8.08. Indemnification. The Borrower agrees to indemnify and---------------
hold harmless the Administrative Agent, each Co-Administrative Agent and eachLender and each of their Affiliates and their respective officers, directors,employees, agents and advisors (each an "Indemnified Party") from and againstany and all claims, damages, losses, liabilities and expenses (including,without limitation, reasonable fees and expenses of counsel) that may beincurred by or asserted against any Indemnified Party, in each case arising outof or in connection with or by reason of, or in connection with the preparationfor a defense of, any investigation, litigation or proceeding (whether or not anIndemnified Party is a party thereto) arising out of, related to or inconnection with the Commitments hereunder or the Advances made pursuant heretoor any transactions done in connection herewith, including, without limitation,any transaction in which any proceeds of the Advances are, or are proposed, to
be applied (collectively, the "Indemnified Matters"); provided that the Borrowershall have no obligation to any Indemnified Party under this Section 8.08 withrespect to (i) matters for which such Indemnified Party has been reimbursed byor on behalf of the Borrower pursuant to any other provision of this Agreement,but only to the extent of such reimbursement, or (ii) Indemnified Matters foundby a court of competent jurisdiction to have resulted from the willfulmisconduct or gross negligence of such Indemnified Party. If any action isbrought against any Indemnified Party, such Indemnified Party shall promptlynotify the
40
Borrower in writing of the institution of such action and the Borrower shallthereupon have the right, at its option, to elect to assume the defense of suchaction; provided, however, that the Borrower shall not, in assuming the defenseof any Indemnified Party in any Indemnified Matter, agree to any dismissal orsettlement of such Indemnified Matter without the prior written consent of suchIndemnified Party, which consent shall not be unreasonably withheld, if suchdismissal or settlement (A) would require any admission or acknowledgement ofculpability or wrongdoing by such Indemnified Party or (B) would provide for anynonmonetary relief to any Person to be performed by such Indemnified Party. Ifthe Borrower so elects, it shall promptly assume the defense of such action,including the employment of counsel (reasonably satisfactory to such IndemnifiedParty) and payment of expenses. Such Indemnified Party shall have the right toemploy its or their own counsel in any such case, but the fees and expenses ofsuch counsel shall be at the expense of such Indemnified Party unless (1) theemployment of such counsel shall have been authorized in writing by the Borrowerin connection with the defense of such action or (2) the Borrower shall not haveproperly employed counsel reasonably satisfactory to such Indemnified Party tohave charge of the defense of such action, in which case such fees and expensesshall be paid by the Borrower. If an Indemnified Party shall have reasonablyconcluded (based upon the advice of counsel) that the representation by onecounsel of such Indemnified Party and the Borrower creates a conflict ofinterest for such counsel, the reasonable fees and expenses of such counselshall be borne by the Borrower and the Borrower shall not have the right todirect the defense of such action on behalf of such Indemnified Party (but shallretain the right to direct the defense of such action on behalf of theBorrower). Anything in this Section 8.08 to the contrary notwithstanding, theBorrower shall not be liable for the fees and expenses of more than one counselfor any Indemnified Party in any jurisdiction as to any Indemnified Matter or,except as specified in the second sentence of this Section 8.08, for anysettlement of any Indemnified Matter effected without its written consent. Allobligations of the Borrower under this Section 8.08 shall survive the making andrepayment of the Advances and the termination of this Agreement.
SECTION 8.09. Confidentiality. Subject to the provisions of Section---------------
8.07(f), each Lender shall, and shall instruct its Affiliates, successors,assigns, advisors, officers, employees, directors, agents, legal counsel andother professional advisors (the "Informed Parties") to, hold all nonpublic
information obtained pursuant to this Agreement in accordance with its customaryprocedures for handling confidential information of this nature and inaccordance with safe and sound banking practices and in any event may makedisclosure reasonably required by a bona fide transferee or participant inconnection with the contemplated transfer or participation or to another Lenderor an Informed Party agreeing to hold such nonpublic information as confidentialor as required or requested by law or to any governmental authority orrepresentative thereof or pursuant to legal process; provided that unlessspecifically prohibited by applicable law or court order, each Lender shallnotify the Borrower of any request by any governmental authority orrepresentative thereof (other than any such request in connection with anexamination of the financial condition of such Lender by such governmentalauthority) for disclosure of any such nonpublic information prior to disclosureof such information; and provided further that in no event shall any Lender beobligated or required to return any materials furnished by the Borrower.
SECTION 8.10. Consent to Jurisdiction and Service of Process. All----------------------------------------------
judicial proceedings brought against the Borrower with respect to this Agreementor any instrument or other documents delivered hereunder may be brought in anystate or federal court in the Borough of Manhattan in the State of New York, andby execution and delivery of this Agreement, the Borrower accepts, for itselfand in connection with its properties, generally and unconditionally, thenonexclusive jurisdiction of the aforesaid
41
courts, and irrevocably agrees to be bound by any final judgment renderedthereby in connection with this Agreement or any instrument or other documentdelivered hereunder from which no appeal has been taken or is available. TheBorrower agrees to receive service of process in any such proceeding in any suchcourt at its office at 114 Fifth Avenue, New York, New York 10011, Attention:Kenneth E. Newman (or at such other address in the Borough of Manhattan in theState of New York as the Borrower shall notify the Administrative Agent fromtime to time) and, if the Borrower ever ceases to maintain such office in theBorough of Manhattan, irrevocably designates and appoints CT Corporation System,1633 Broadway, New York, New York 10019, or any other address in the State ofNew York communicated by CT Corporation System to the Administrative Agent, asits agent to receive on its behalf service of all process in any such proceedingin any such court, such service being hereby acknowledged by the Borrower to beeffective and binding service in every respect.
SECTION 8.11. Governing Law. This Agreement shall be governed by, and-------------
construed in accordance with, the laws of the State of New York.
SECTION 8.12. Execution in Counterparts. This Agreement may be executed-------------------------
in any number of counterparts and by different parties hereto in separatecounterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.Delivery of an executed counterpart of a signature page to this Agreement bytelecopier shall be effective as delivery of a manually executed counterpart ofthis Agreement. A full set of executed counterparts of this Agreement shall belodged with the Administrative Agent and the Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to beexecuted by their respective officers thereunto duly authorized, as of the datefirst above written.
SECTION 1.01. Certain Defined Terms.............................. 1SECTION 1.02. Computation of Time Periods........................ 11SECTION 1.03. Accounting Terms................................... 11
ARTICLE IIAMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances....................................... 11SECTION 2.02. Making the Advances................................ 12SECTION 2.03. Facility Fee....................................... 13SECTION 2.04. Reduction of the Commitments....................... 13SECTION 2.05. Repayment of Advances.............................. 13SECTION 2.06. Interest on Advances............................... 13SECTION 2.07. Additional Interest on Eurodollar Rate Advances.... 14SECTION 2.08. Interest Rate Determination........................ 14SECTION 2.09. Optional Conversion of Advances.................... 15SECTION 2.10. Prepayments of Advances............................ 16SECTION 2.11. Increased Costs.................................... 16SECTION 2.12. Illegality......................................... 17SECTION 2.13. Payments and Computations.......................... 18SECTION 2.14. Taxes.............................................. 19SECTION 2.15. Sharing of Payments, Etc........................... 21SECTION 2.16. Mandatory Assignment by a Lender; Mitigation....... 21SECTION 2.17. Evidence of Debt................................... 22SECTION 2.18. Use of Proceeds.................................... 23SECTION 2.19. Increase in the Aggregate Commitments.............. 23SECTION 2.20. Extension of Termination Date...................... 24
ARTICLE IIICONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness ofSection 2.01....................................... 26
SECTION 3.02. Conditions Precedent to Each Borrowing............. 27SECTION 3.03. Determinations Under Section 3.01.................. 28
Exhibit A - Form of Notice of BorrowingExhibit B - Form of Assignment and AcceptanceExhibit C - Form of Opinion of Assistant General Counsel of the BorrowerExhibit D-1 - Form of Foreign Lender CertificateExhibit D-2 - Form of Foreign Lender Certificate
(ii)
FIVE-YEAR CREDIT AGREEMENT
Dated as of October 30, 1996
THE WALT DISNEY COMPANY, a Delaware corporation (the "Borrower"), thebanks, financial institutions and other institutional lenders (the "InitialLenders") listed on the signature pages hereof under the heading "The InitialLenders", CITICORP USA, INC., a Delaware corporation ("CUSA"), as administrativeagent (together with any successor Administrative Agent appointed pursuant toArticle VII, the "Administrative Agent") for the Lenders (as hereinafterdefined) hereunder, and CREDIT SUISSE, a Swiss banking corporation ("CreditSuisse"), and BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, a nationalbanking corporation ("Bank of America"), as co-administrative agents (the "Co-Administrative Agents") for the Lenders hereunder, hereby agree as follows:
ARTICLE IDEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the---------------------
following terms shall have the following meanings (such meanings to be equallyapplicable to both the singular and plural forms of the terms defined):
"ABC" means ABC, Inc. (successor in interest to Capital Cities/ABC,Inc.), a New York corporation and a wholly owned subsidiary of theBorrower, or any successor thereto.
"Administrative Agent" has the meaning specified in the recital ofparties to this Agreement.
"Administrative Agent's Account" means such account of theAdministrative Agent maintained by the Administrative Agent at the officeof Citibank at 399 Park Avenue, New York, New York 10043, as theAdministrative Agent shall notify the Borrower and the Lenders from time totime.
"Advance" means an advance by a Lender to the Borrower as part of aBorrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance,each of which shall be a "Type" of Advance.
"Affiliate" means, as to any Person, any other Person that, directlyor indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person.
"Agreement" means this Five-Year Credit Agreement, as it may beamended, supplemented or otherwise modified from time to time in accordancewith Section 8.01.
"Anniversary Date" means February 15, 1998 and February 15 in eachsucceeding calendar year occurring during the term of this Agreement.
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"Applicable Lending Office" means, with respect to each Lender, suchLender's Domestic Lending Office in the case of a Base Rate Advance andsuch Lender's Eurodollar Lending Office in the case of a Eurodollar RateAdvance.
"Assignment and Acceptance" means an assignment and acceptance enteredinto by a Lender and an Eligible Assignee, and accepted by theAdministrative Agent and the Borrower, in substantially the form of ExhibitB hereto.
"Assuming Lender" has the meaning specified in Section 2.19(d).
"Assumption Agreement" has the meaning specified in Section2.19(d)(ii).
"Bank of America" has the meaning specified in the recital of partiesto this Agreement.
"Base Rate" means, for each day in any period, a fluctuating interestrate per annum as shall be in effect from time to time, which rate perannum shall at all times for such day during such period be equal to thehighest of:
(a) the rate of interest announced publicly by Citibank in NewYork, New York, from time to time, as Citibank's base rate in effectfor such day;
(b) the sum (adjusted to the nearest 1/4 of one percent or, ifthere is no nearest 1/4 of one percent, to the next higher 1/4 of onepercent) of (i) 0.50%, (ii) the rate obtained by dividing (A) thelatest three-week moving average of secondary market morning offeringrates in the United States for three-month certificates of deposit ofmajor United States money market banks, such three-week moving average(adjusted on the basis of a year of 365 or 366 days, as the case maybe) being determined weekly on each Monday (or, if any such day is nota Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis ofsuch rates reported by certificate of deposit dealers to and publishedby the Federal Reserve Bank of New York or, if such publication shall
be suspended or terminated, on the basis of quotations for such ratesreceived by Citibank from three New York certificate of depositdealers of recognized standing selected by Citibank, by (B) apercentage equal to 100% minus the average of the daily percentagesspecified during such three-week period by the Board of Governors ofthe Federal Reserve System (or any successor thereto) for determiningthe maximum reserve requirement (including, but not limited to, anyemergency, supplemental or other marginal reserve requirement) forCitibank in respect of liabilities consisting of or including (amongother liabilities) three-month U.S. dollar nonpersonal time depositsin the United States, and (iii) the average during such three-weekperiod of the annual assessment rates estimated by Citibank fordetermining the then current annual assessment payable by Citibank tothe Federal Deposit Insurance Corporation (or any successor thereto)for insuring U.S. dollar deposits of Citibank in the United States;and
(c) 0.50% per annum above the Federal Funds Rate for such day.
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"Base Rate Advance" means an Advance which bears interest as providedin Section 2.06(a)(i).
"Borrowing" means a borrowing consisting of simultaneous Advances ofthe same Type made by each of the Lenders pursuant to Section 2.01.
"Business Day" means a day of the year on which banks are not requiredor authorized to close in Los Angeles, California, or New York City, NewYork, or San Francisco, California, or, if the applicable Business Dayrelates to any Eurodollar Rate Advances, on which dealings are carried onin the London interbank market.
"Citibank" means Citibank, N.A., a national banking association.
"Co-Administrative Agents" has the meaning specified in the recital ofparties to this Agreement.
"Commitment" has the meaning specified in Section 2.01.
"Commitment Date" has the meaning specified in Section 2.19(b).
"Commitment Increase" has the meaning specified in Section 2.19(a).
"Consenting Lender" has the meaning specified in Section 2.20(b).
"Consolidated EBITDA" means, for any period, (a) net income or netloss, as the case may be, of the Borrower and its subsidiaries on aconsolidated basis for such period, as determined in accordance with GAAPfor such period, plus (b) the sum of all amounts which, in the
determination of such consolidated net income or net loss, as the case maybe, for such period, have been deducted for (i) Consolidated InterestExpense, (ii) consolidated income tax expense, (iii) consolidateddepreciation expense, and (iv) consolidated amortization expense, in eachcase determined in accordance with GAAP for such period.
"Consolidated Interest Expense" means, for any period, total interestexpense of the Borrower and its subsidiaries with respect to alloutstanding Debt of the Borrower and its subsidiaries during such period,all as determined on a consolidated basis for such period and in accordancewith GAAP for such period.
"Convert", "Conversion" and "Converted" each refers to a conversion ofAdvances of one Type into Advances of another Type pursuant to Section 2.08or 2.09.
"Credit Suisse" has the meaning specified in the recital of parties tothis Agreement.
"CUSA" has the meaning specified in the recital of parties to thisAgreement.
"Debt" means, with respect to any Person: (a) indebtedness forborrowed money, (b) obligations evidenced by bonds, debentures, notes orother similar instruments, (c) obligations
4to pay the deferred purchase price of property or services (other thantrade payables incurred in the ordinary course of business), (d)obligations as lessee under leases which shall have been or should be, inaccordance with GAAP, recorded as capital leases and (e) obligations underdirect or indirect guaranties in respect of, and obligations (contingent orotherwise) to purchase or otherwise acquire, or otherwise to assure acreditor against loss in respect of, indebtedness or obligations of anyother Person of the kinds referred to in clauses (a) through (d) above.
"Disney" means Disney Enterprises, Inc., a Delaware corporation and awholly owned subsidiary of the Borrower, or any successor thereto.
"Domestic Lending Office" means, with respect to any Lender, theoffice of such Lender specified as its "Domestic Lending Office" oppositeits name on Schedule I hereto or in the Assumption Agreement or theAssignment and Acceptance, as the case may be, pursuant to which it becamea Lender, or such other office of such Lender as such Lender may from timeto time specify to the Borrower and the Administrative Agent for suchpurpose.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (a) a Lender or any Affiliate of a Lender or
(b) any bank or other financial institution, or any other Person, which hasbeen approved in writing by the Borrower and the Administrative Agent as anEligible Assignee for purposes of this Agreement; provided, however, thatneither the Borrower's approval nor the Administrative Agent's approvalshall be unreasonably withheld; and provided further, however, that theBorrower may withhold its approval if the Borrower reasonably believes thatan assignment to such Eligible Assignee pursuant to Section 8.07 willresult in the incurrence of increased costs payable by the Borrowerpursuant to Section 2.11 or 2.14.
"Environmental Claim" means any administrative, regulatory or judicialaction, suit, demand, claim, lien, notice or proceeding relating to anyEnvironmental Law or any Environmental Permit.
"Environmental Law" means any federal, state or local statute, law,rule, regulation, ordinance, code or duly promulgated policy or rule ofcommon law, now or hereafter in effect, and in each case as amended, andany judicial or administrative interpretation thereof, including any order,consent decree or judgment, relating to the environment, health, safety orany Hazardous Material.
"Environmental Permit" means any permit, approval, identificationnumber, license or other authorization required under any applicableEnvironmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, asamended from time to time, and the regulations promulgated and the rulingsissued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV ofERISA is a member of the Borrower's controlled group, or under commoncontrol with the Borrower, within the meaning of Section 414 of theInternal Revenue Code of 1986, as amended.
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"ERISA Event" means: (a) (i) the occurrence with respect to a Plan ofa reportable event, within the meaning of Section 4043 of ERISA, unless the30-day notice requirement with respect thereto has been waived by thePension Benefit Guaranty Corporation or (ii) the provisions of paragraph(1) of Section 4043(b) of ERISA (without regard to paragraph (2) of suchSection) are applicable with respect to a contributing sponsor, as definedin Section 4001(a)(13) of ERISA, of a Plan, and an event described inparagraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA couldreasonably be expected to occur with respect to such Plan within thefollowing 30 days; (b) the provision by the administrator of any Plan of anotice of intent to terminate such Plan, pursuant to Section 4041(a)(2) ofERISA (including any such notice with respect to a plan amendment referredto in Section 4041(e) of ERISA); (c) the cessation of operations by the
Borrower or any ERISA Affiliate at a facility in the circumstancesdescribed in Section 4062(e) of ERISA; (d) the withdrawal by the Borroweror any ERISA Affiliate from a Multiple Employer Plan during a plan year forwhich it was a substantial employer, as defined in Section 4001(a)(2) ofERISA; (e) the failure by the Borrower or any ERISA Affiliate to make apayment to a Plan described in Section 302(f)(1)(A) of ERISA; (f) theadoption of an amendment to a Plan requiring the provision of security tosuch Plan, pursuant to Section 307 of ERISA; or (g) the institution by thePension Benefit Guaranty Corporation of proceedings to terminate a Plan,pursuant to Section 4042 of ERISA, or the occurrence of any event orcondition which is reasonably likely to constitute grounds under Section4042 of ERISA for the termination of, or the appointment of a trustee toadminister, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term inRegulation D of the Board of Governors of the Federal Reserve System, as ineffect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender, theoffice of such Lender specified as its "Eurodollar Lending Office" oppositeits name on Schedule I hereto or in the Assumption Agreement or theAssignment and Acceptance, as the case may be, pursuant to which it becamea Lender (or, if no such office is specified, its Domestic Lending Office),or such other office of such Lender as such Lender may from time to timespecify to the Borrower and the Administrative Agent for such purpose.
"Eurodollar Rate" means, for any Interest Period for each EurodollarRate Advance comprising part of the same Borrowing, an interest rate perannum equal to the average (rounded upward to the nearest whole multiple of1/16 of 1% per annum, if such average is not such a multiple) of the rateper annum at which deposits in U.S. dollars are offered by the principaloffice of each of the Reference Banks in London, England to prime banks inthe London interbank market at 11:00 A.M. (London time) two Business Daysbefore the first day of such Interest Period for a period equal to suchInterest Period and in an amount substantially equal to such ReferenceBank's (or, in the case of Citibank, CUSA's) Eurodollar Rate Advancecomprising part of such Borrowing. The Eurodollar Rate for any InterestPeriod for each Eurodollar Rate Advance comprising part of the sameBorrowing shall be determined by the Administrative Agent on the basis ofapplicable rates furnished to and received by the Administrative Agent fromthe Reference Banks two Business Days before the first day of such InterestPeriod, subject, however, to the provisions of Section 2.08.
6
"Eurodollar Rate Advance" means an Advance which bears interest asprovided in Section 2.06(a)(ii).
"Eurodollar Rate Margin" means, as of any date, a percentage per annum
"Eurodollar Rate Reserve Percentage" means, with respect to any Lenderfor any Interest Period for any Eurodollar Rate Advance, the reservepercentage applicable during such Interest Period (or, if more than onesuch percentage shall be so applicable, the daily average of suchpercentages for those days in such Interest Period during which any suchpercentage shall be so applicable) under regulations issued from time totime by the Board of Governors of the Federal Reserve System (or anysuccessor thereto) for determining the maximum reserve requirement(including, without limitation, any emergency, supplemental or othermarginal reserve requirement) for such Lender with respect to liabilitiesor assets consisting of or including Eurocurrency Liabilities having a termequal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Existing Credit Agreements" means, collectively, (a) the 364-DayCredit Agreement dated as of October 31, 1995 among DC Holdco, Inc.(predecessor in interest to The Walt Disney Company), the financial
institutions party thereto, CUSA, as the administrative agent thereunder,and Credit Suisse, as the co-administrative agent thereunder, as amended,supplemented or otherwise modified to (but not including) the EffectiveDate, and (b) the Five-Year Credit Agreement dated as of October 31, 1995among DC Holdco, Inc. (predecessor in interest to The Walt Disney Company),the financial institutions party thereto, CUSA, as the administrative agentthereunder, and Credit Suisse, as the co-administrative agent thereunder,as amended, supplemented or otherwise modified to (but not including) theEffective Date.
"Extension Date" has the meaning specified in Section 2.20(b).
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"Facility Fee Percentage" means, as of any date, a percentage perannum determined by reference to the Public Debt Rating in effect on suchdate as set forth below:
"Federal Funds Rate" means, for any period, a fluctuating interestrate per annum equal for each day during such period to the weightedaverage of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, aspublished for such day (or, if such day is not a Business Day, for theimmediately preceding Business Day) by the Federal Reserve Bank of NewYork, or, if such rate is not so published for any day which is a BusinessDay, the average of the quotations for such day on such transactionsreceived by the Administrative Agent from three federal funds brokers ofrecognized standing selected by the Administrative Agent.
"GAAP" means generally accepted accounting principles consistent withthose applied in the preparation of the audited financial statementsreferred to in Section 4.01(c)(i) dated September 30, 1995, subject,however, to the provisions of Section 1.03.
"Hazardous Material" means (a) any petroleum or petroleum product,natural or synthetic gas, asbestos in any form that is or could becomefriable, urea formaldehyde foam insulation, or radon gas, (b) any substancedefined as or included in the definition of "hazardous substances",hazardous wastes", hazardous materials", "toxic substances", "contaminants"or "pollutants", or words of similar import, under any applicableEnvironmental Law or (c) any other substance to which exposure is regulatedby any governmental or regulatory authority.
"Increase Date" has the meaning specified in Section 2.19(a).
"Increasing Lender" has the meaning specified in Section 2.19(b).
"Indemnified Matters" has the meaning specified in Section 8.08.
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"Indemnified Party" has the meaning specified in Section 8.08.
"Informed Parties" has the meaning specified in Section 8.09.
"Initial Lender" has the meaning specified in the recital of partiesto this Agreement.
"Interest Period" means, for each Eurodollar Rate Advance comprisingpart of the same Borrowing, the period commencing on the date of suchEurodollar Rate Advance or on the date of the Conversion of any Base RateAdvance into such Eurodollar Rate Advance and ending on the last day of theperiod selected by the Borrower pursuant to the provisions below and,thereafter, each subsequent period commencing on the last day of theimmediately preceding Interest Period and ending on the last day of theperiod selected by the Borrower pursuant to the provisions below. Theduration of each such Interest Period shall be one, two, three, six or, ifgenerally available to all of the Lenders, twelve months as the Borrowermay, upon notice received by the Administrative Agent not later than 1:00P.M. (New York City time) on the third Business Day prior to the first dayof such Interest Period, select; provided, however, that:
(i) Interest Periods commencing on the same date forEurodollar Rate Advances comprising part of the same Borrowing shallbe of the same duration;
(ii) whenever the last day of any Interest Period wouldotherwise occur on a day other than a Business Day, the last day ofsuch Interest Period shall be extended to occur on the next succeedingBusiness Day, provided, however, that if such extension would causethe last day of such Interest Period to occur in the next succeedingcalendar month, the last day of such Interest Period shall occur onthe immediately preceding Business Day;
(iii) whenever the first day of any Interest Period occurs on aday of an initial calendar month for which there is no numericallycorresponding day in the calendar month that succeeds such initialcalendar month by the number of months equal to the number of monthsin such Interest Period, such Interest Period shall end on the lastBusiness Day of such succeeding calendar month; and
(iv) the Borrower may not select for any Advance any InterestPeriod which ends after the scheduled Termination Date then in effect.
"IRS" has the meaning specified in Section 2.14(e).
"Lenders" means, collectively, each Initial Lender, each AssumingLender that shall become a party hereto pursuant to Section 2.19 or 2.20and each Eligible Assignee that shall become a party hereto pursuant toSection 8.07; provided, however, that for purposes of any determination tobe made under Section 2.07, 2.11, 2.12 or 8.04(b) with respect to CUSA, inits capacity as a Lender, the term "Lenders" shall be deemed to includeCitibank.
"Lien" means any lien, security interest or other charge orencumbrance of any kind, or any other type of preferential arrangementwhich has the same effect as a lien or security interest.
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"Majority Lenders" means, at any time, Lenders owed at least amajority in interest of the aggregate unpaid principal amount of theAdvances owing to the Lenders at such time, or, if no such principal amountis outstanding at such time, Lenders having at least a majority in interestof the Commitments at such time; provided, however, that neither theBorrower nor any of its Affiliates, if a Lender, shall be included in thedetermination of the Majority Lenders at any time.
"Material Subsidiary" means, at any date of determination, asubsidiary of the Borrower that, either individually or together with itssubsidiaries, taken as a whole, has total assets exceeding $100,000,000 on
"Measurement Period" means, at any date of determination, the mostrecently completed four consecutive fiscal quarters of the Borrower on orimmediately prior to such date.
"Moody's" means Moody's Investors Service, Inc. or any successorthereto.
"Multiemployer Plan" means a multiemployer plan, as defined in Section4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is makingor accruing an obligation to make contributions, or has within any of thepreceding five plan years made or accrued an obligation to makecontributions.
"Multiple Employer Plan" means a single employer plan, as defined inSection 4001(a)(15) of ERISA, that (i) is maintained for employees of theBorrower or any ERISA Affiliate and at least one Person other than theBorrower and the ERISA Affiliates or (ii) was so maintained and in respectof which the Borrower or an ERISA Affiliate could have liability underSection 4064 or 4069 of ERISA in the event such plan has been or were to beterminated.
"Non-Consenting Lender" has the meaning specified in Section 2.20(b).
"Note" has the meaning specified in Section 2.17.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Other Taxes" has the meaning specified in Section 2.14(b).
"Person" means an individual, partnership, corporation (including abusiness trust), joint stock company, trust, unincorporated association,joint venture or other entity, or a government or any political subdivisionor agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Public Debt Rating" means, as of any date of determination, thehigher rating that has been most recently announced by either S&P orMoody's, as the case may be, for any class of non-credit enhanced long-termsenior unsecured public debt issued by the Borrower. For purposes of theforegoing, (a) if only one of S&P and Moody's shall have in effect a PublicDebt Rating, the Eurodollar Rate Margin and the Facility Fee Percentageshall be determined by
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reference to the available rating; (b) if neither S&P nor Moody's shallhave in effect a Public Debt Rating, the Eurodollar Rate Margin and the
Facility Fee Percentage will be set in accordance with Level 4 under thedefinition of "Eurodollar Rate Margin" or "Facility Fee Percentage", as thecase may be; (c) if the ratings established by S&P and Moody's shall fallwithin different levels, the Eurodollar Rate Margin and the Facility FeePercentage shall be based upon the higher rating; (d) if any ratingestablished by S&P or Moody's shall be changed, such change shall beeffective as of the date on which such change is first announced publiclyby the rating agency making such change; and (e) if S&P or Moody's shallchange the basis on which ratings are established, each reference to thePublic Debt Rating announced by S&P or Moody's, as the case may be, shallrefer to the then equivalent rating by S&P or Moody's, as the case may be.
"Reference Banks" means Citibank, Credit Suisse, Bank of America andBarclays Bank PLC, or, in the event that less than two of such banks remainLenders hereunder at any time, any other commercial bank designated by theBorrower and approved by the Majority Lenders as constituting a "ReferenceBank" hereunder.
"Register" has the meaning specified in Section 8.07(c).
"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"SEC" has the meaning specified in Section 5.01(e)(i).
"Significant Subsidiary" means any subsidiary of the Borrower or anyof its subsidiaries that constitutes a "significant subsidiary" under Rule405 promulgated by the SEC under the Securities Act of 1933, as amended.
"Single Employer Plan" means a single employer plan, as defined inSection 4001(a)(15) of ERISA, that (i) is maintained for employees of theBorrower or an ERISA Affiliate and no Person other than the Borrower andthe ERISA Affiliates or (ii) was so maintained and in respect of which theBorrower or an ERISA Affiliate could have liability under Section 4069 ofERISA in the event such plan has been or were to be terminated.
"Taxes" has the meaning specified in Section 2.14(a).
"Termination Date" means the earlier of (a) February 15, 2002, subjectto the extension thereof pursuant to Section 2.20, and (b) the date oftermination in whole of the aggregate Commitments pursuant to Section 2.04or 6.01; provided, however, that the Termination Date of any Lender that isa Non-Consenting Lender to any requested extension pursuant to Section 2.20shall be the Termination Date in effect immediately prior to the applicableExtension Date for all purposes of this Agreement.
"364-Day Credit Agreement" means the 364-Day Credit Agreement beingentered into on the date of this Agreement among the Borrower, the banks,financial institutions and other institutional lenders party thereto, CUSA,as the administrative agent thereunder, and Credit
Suisse and Bank of America, as the co-administrative agents thereunder, assuch agreement may be amended, supplemented or otherwise modified hereafterfrom time to time.
"Type" has the meaning specified in the definition of "Advance".
"United States" and "U.S." each means the United States of America.
SECTION 1.02. Computation of Time Periods. In this Agreement in the---------------------------
computation of periods of time from a specified date to a later specified date,the word "from" means "from and including" and the words "to" and "until" eachmeans "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not specifically----------------
defined herein shall be construed in accordance with GAAP; provided, however,that if any changes in accounting principles from those used in the preparationof the financial statements referred to in Section 4.01(c)(i) dated September30, 1995 hereafter occur by reason of the promulgation of rules, regulations,pronouncements, opinions or other requirements of the Financial AccountingStandards Board or the American Institute of Certified Public Accountants (orsuccessors thereto or agencies with similar functions) and result in a change inthe method of calculation of financial covenants or the terms related theretocontained in this Agreement, the Borrower shall, at its option, (i) furnish tothe Administrative Agent, together with each delivery of the consolidatedfinancial statements of the Borrower and its subsidiaries required to bedelivered pursuant to Section 5.01(e), a written reconciliation setting forththe differences that would have resulted if such financial statements had beenprepared utilizing accounting principles and policies in conformity with thoseused to prepare the financial statements referred to in Section 4.01(c)(i) datedSeptember 30, 1995 or (ii) enter into negotiations with the Administrative Agentand the Lenders to amend such financial covenants or terms equitably to reflectsuch changes so that the criteria for evaluating the financial condition of theBorrower and its subsidiaries shall be the same after such changes as if suchchanges had not been made; provided, however, that at all times in the case ofclause (i) above, and in the case of clause (ii) above until the amendmentreferred to in such clause (ii) becomes effective, all covenants and relatedcalculations under this Agreement shall be performed, observed and determined asthough no such changes in accounting principles had been made.
ARTICLE IIAMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. Each Lender severally agrees, on the------------
terms and conditions hereinafter set forth, to make Advances to the Borrowerfrom time to time on any Business Day during the period from the Effective Dateuntil the Termination Date in an aggregate amount not to exceed at any timeoutstanding the amount set forth opposite such Lender's name on the signaturepages hereof or, if such Lender has become a Lender hereunder pursuant to anAssumption Agreement, the amount set forth as the Commitment of such Lender insuch Assumption Agreement or, if such Lender has entered into an Assignment andAcceptance, the amount set forth for such Lender in the Register maintained bythe Administrative Agent pursuant to Section 8.07(c), as such amount may bereduced pursuant to Section 2.04 or increased pursuant to Section 2.19 (suchLender's "Commitment"). Each Borrowing shall be in an aggregate amount of$5,000,000 or an integral multiple of $1,000,000 in excess thereof and shallconsist of Advances of the same Type made on the same day by the Lenders ratably
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according to their respective Commitments. Within the limits of each Lender'sCommitment, the Borrower from time to time may borrow under this Section 2.01,prepay pursuant to Section 2.10 and reborrow under this Section 2.01.
SECTION 2.02. Making the Advances. (a) Each Borrowing shall be made-------------------
on notice, given not later than 11:00 A.M. (New York City time) on the sameBusiness Day as the date of a proposed Borrowing comprised of Base Rate Advancesand not later than 1:00 P.M. (New York City time) on the third Business Dayprior to the date of a proposed Borrowing comprised of Eurodollar Rate Advances,by the Borrower to the Administrative Agent, which shall give to each Lenderprompt notice thereof by telecopier or telex. Each such notice of a Borrowing (a"Notice of Borrowing") shall be by telecopier or telex, or by telephone,confirmed immediately by telecopier or telex, in substantially the form ofExhibit A hereto, specifying therein the requested (i) date of such Borrowing(which shall be a Business Day), (ii) Type of Advances comprising suchBorrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of aBorrowing comprised of Eurodollar Rate Advances, initial Interest Period foreach such Advance. Each Lender shall, before 1:00 P.M. (New York City time) onthe date of such Borrowing, make available for the account of its ApplicableLending Office to the Administrative Agent at the Administrative Agent'sAccount, in same day funds, such Lender's ratable portion of such Borrowing.After the Administrative Agent's receipt of such funds and upon fulfillment ofthe applicable conditions set forth in Article III, the Administrative Agentwill make such funds available to the Borrower at the office where theAdministrative Agent's Account is maintained.
(b) Anything in subsection (a) above or Section 2.01 to the contrarynotwithstanding, the Borrower may not select Eurodollar Rate Advances for anyBorrowing if the aggregate amount of such Borrowing is less than $20,000,000 orif the obligation of the Lenders to make Eurodollar Rate Advances shall besuspended at such time pursuant to Section 2.08.
(c) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. In the case of any Borrowing which the related Notice of Borrowingspecifies is to be comprised of Eurodollar Rate Advances, the Borrower shallindemnify each Lender against any loss, cost or expense incurred by such Lenderas a result of any failure to fulfill on or before the date specified in suchNotice of Borrowing for such Borrowing the applicable conditions set forth inArticle III, including, without limitation, any loss, cost or expense incurredby reason of the liquidation or reemployment of deposits or other funds acquiredby such Lender to fund the Advance to be made by such Lender as part of suchBorrowing when such Advance, as a result of such failure, is not made on suchdate.
(d) Unless the Administrative Agent shall have received notice from aLender prior to the date of any Borrowing that such Lender will not makeavailable to the Administrative Agent such Lender's ratable portion of suchBorrowing, the Administrative Agent may assume that such Lender has made suchportion available to the Administrative Agent on the date of such Borrowing inaccordance with subsection (a) of this Section 2.02 and the Administrative Agentmay, in reliance upon such assumption, make available to the Borrower on suchdate a corresponding amount. If and to the extent that any Lender shall nothave so made such ratable portion available to the Administrative Agent, suchLender agrees to pay to the Administrative Agent forthwith on demand suchcorresponding amount together with interest thereon, for each day from the datesuch amount is made available to the Borrower until the date such amount is paidto the Administrative Agent, at the Federal Funds Rate; provided, however, that(i) within two Business Days after any Lender shall fail to make such ratableportion available to the Administrative Agent, the Administrative Agent shallnotify the Borrower of such failure
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and (ii) if such Lender shall not have paid such corresponding amount to theAdministrative Agent within two Business Days after such demand is made of suchLender by the Administrative Agent, the Borrower agrees to repay to theAdministrative Agent forthwith, upon demand by the Administrative Agent to theBorrower, such corresponding amount together with interest thereon, for each dayfrom the date such amount is made available to the Borrower until the date suchamount is repaid to the Administrative Agent, at the interest rate applicable atthe time to Advances comprising such Borrowing. If and to the extent suchcorresponding amount shall be paid by such Lender to the Administrative Agent inaccordance with this Section 2.02(d), such amount so paid shall constitute suchLender's Advance as part of such Borrowing for all purposes of this Agreement.
(e) The failure of any Lender to make the Advance to be made by it aspart of any Borrowing shall not relieve any other Lender of its obligation, ifany, hereunder to make its Advance on the date of such Borrowing, but no Lendershall be responsible for the failure of any other Lender to make the Advance tobe made by such other Lender on the date of any Borrowing.
SECTION 2.03. Facility Fee. The Borrower agrees to pay to each Lender
------------a facility fee on the average daily amount (whether used or unused) of suchLender's Commitment from the Effective Date, in the case of each Initial Lender,and from the later of (a) the Effective Date and (b) the effective datespecified in the Assumption Agreement or the Assignment and Acceptance pursuantto which it became a Lender, in the case of each other Lender, until, in eachcase, the Termination Date, payable quarterly in arrears on the first BusinessDay of each January, April, July and October during the term of such Lender'sCommitment, commencing January 2, 1997, and on the Termination Date, at the rateper annum equal to the Facility Fee Percentage in effect from time to time.
SECTION 2.04. Reduction of the Commitments. The Borrower shall have----------------------------
the right, upon at least three Business Days' notice to the AdministrativeAgent, to terminate in whole or reduce ratably in part the unused portions ofthe respective Commitments of the Lenders, provided that each partial reductionshall be in the aggregate amount of $5,000,000 or an integral multiple of$1,000,000 in excess thereof.
SECTION 2.05. Repayment of Advances. The Borrower shall repay to each---------------------
Lender on the Termination Date the aggregate principal amount of the Advancesowing to such Lender on such date.
SECTION 2.06. Interest on Advances. (a) Scheduled Interest. The-------------------- ------------------
Borrower shall pay to each Lender interest on the unpaid principal amount ofeach Advance owing to such Lender from the date of such Advance until suchprincipal amount shall be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a Base------------------
Rate Advance, a rate per annum equal at all times to the remainder of (A)the Base Rate in effect from time to time minus (B) the Facility FeePercentage in effect from time to time, payable quarterly in arrears on thefirst Business Day of each January, April, July and October and during suchperiods and on the date such Base Rate Advance shall be Converted or paidin full.
(ii) Eurodollar Rate Advances. During such periods as such Advance is------------------------
a Eurodollar Rate Advance, a rate per annum equal at all times during eachInterest Period for such Advance to the sum of (A) the Eurodollar Rate forsuch Interest Period for such Advance and (B) the
14Eurodollar Rate Margin in effect from time to time, payable in arrears onthe last day of such Interest Period and, if such Interest Period has aduration of more than three months, on the date which occurs three monthsand, if applicable, six months, nine months and twelve months after the
first day of such Interest Period and on the date such Eurodollar RateAdvance shall be Converted or paid in full.
(b) Default Interest. The Borrower shall pay interest on the unpaid----------------
principal amount of each Advance that is not paid when due and on the unpaidamount of all interest, fees and other amounts payable hereunder that is notpaid when due, payable on demand, at a rate per annum equal at all times to (i)in the case of any amount of principal, the greater of (x) 2% per annum abovethe rate per annum required to be paid on such Advance immediately prior to thedate on which such amount became due and (y) 2% per annum above the Base Rate ineffect from time to time and (ii) to the fullest extent permitted by law, in thecase of all other amounts, 2% per annum above the Base Rate in effect from timeto time.
SECTION 2.07. Additional Interest on Eurodollar Rate Advances. The-----------------------------------------------
Borrower shall pay to each Lender, so long as such Lender shall be requiredunder regulations of the Board of Governors of the Federal Reserve System tomaintain reserves with respect to liabilities or assets consisting of orincluding Eurocurrency Liabilities, additional interest on the unpaid principalamount of each Eurodollar Rate Advance of such Lender, from the date of suchAdvance until such principal amount is paid in full, at an interest rate perannum equal at all times to the remainder obtained by subtracting (i) theEurodollar Rate for the applicable Interest Period for such Advance from (ii)the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100%minus the Eurodollar Rate Reserve Percentage of such Lender for such InterestPeriod, payable on each date on which interest is payable on such Advance. Suchadditional interest shall be determined by such Lender and notified inreasonable detail to the Borrower through the Administrative Agent.
SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank---------------------------
agrees to furnish to the Administrative Agent timely information for the purposeof determining each Eurodollar Rate. If any one or more of the Reference Banksshall not furnish such timely information to the Administrative Agent for thepurpose of determining such interest rate, the Administrative Agent shalldetermine such interest rate on the basis of timely information furnished by theremaining Reference Banks.
(b) The Administrative Agent shall give prompt notice to the Borrowerand the Lenders of the applicable interest rate determined by the AdministrativeAgent for purposes of Section 2.06(a)(i) or (a)(ii), and the rate, if any,furnished by each Reference Bank for the purpose of determining the applicableinterest rate under Section 2.06(a)(ii).
(c) If fewer than two Reference Banks furnish timely information tothe Administrative Agent for purposes of determining the Eurodollar Rate for anyEurodollar Rate Advances, (i) the Administrative Agent shall forthwith notifythe Borrower and the Lenders that the interest rate cannot be determined forsuch Eurodollar Rate Advances, (ii) each such Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base RateAdvance (or, if such Advance is then a Base Rate Advance, will continue as aBase Rate Advance), and (iii) the obligation of the Lenders to make, or toConvert Advances into, Eurodollar Rate Advances shall be suspended until
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the Administrative Agent shall notify the Borrower and the Lenders that thecircumstances causing such suspension no longer exist.
(d) If, with respect to any Eurodollar Rate Advances, the MajorityLenders notify the Administrative Agent that the Eurodollar Rate for anyInterest Period for such Advances will not adequately reflect the cost to suchMajority Lenders (which cost each such Majority Lender reasonably determines ingood faith is material) of making, funding or maintaining their respectiveEurodollar Rate Advances for such Interest Period, the Administrative Agentshall forthwith so notify the Borrower and the Lenders, whereupon, unless theEurodollar Rate Margin shall be increased to reflect such costs as determined bysuch Majority Lenders and as agreed by the Borrower, (i) each Eurodollar RateAdvance will automatically, on the last day of the then existing Interest Periodtherefor, Convert into a Base Rate Advance, and (ii) the obligation of theLenders to make, or to Convert Advances into, Eurodollar Rate Advances shall besuspended until the Majority Lenders shall notify the Administrative Agent, andthe Administrative Agent shall in turn notify the Borrower and the Lenders, thatthe circumstances causing such suspension no longer exist. The AdministrativeAgent shall use reasonable efforts to determine from time to time whether thecircumstances causing such suspension no longer exist and, promptly after theAdministrative Agent knows that the circumstances causing such suspension nolonger exist, the Administrative Agent shall so notify the Borrower and theLenders.
(e) If the Borrower shall fail to select the duration of any InterestPeriod for any Eurodollar Rate Advances in accordance with the provisionscontained in the definition of "Interest Period" in Section 1.01, theAdministrative Agent will forthwith so notify the Borrower and the Lenders andsuch Advances will automatically, on the last day of the then existing InterestPeriod therefor, Convert into Base Rate Advances.
(f) On the date on which the aggregate unpaid principal amount ofEurodollar Rate Advances comprising any Borrowing shall be reduced, by paymentor prepayment or otherwise, to less than $20,000,000, such Eurodollar RateAdvances shall automatically Convert into Base Rate Advances and, on and aftersuch date, the right of the Borrower to Convert such Advances into EurodollarRate Advances shall terminate; provided, however, that if and so long as eachsuch Eurodollar Rate Advance shall have the same Interest Period as EurodollarRate Advances comprising another Borrowing or Borrowings, and the aggregateunpaid principal amount of all such Eurodollar Rate Advances shall equal orexceed $20,000,000, the Borrower shall have the right to continue all suchEurodollar Rate Advances as, or to Convert all such Advances into, Eurodollar
(g) Upon the occurrence and during the continuance of any Event ofDefault under Section 6.01(a), (i) each Eurodollar Rate Advance willautomatically, on the last day of the then existing Interest Period therefor,Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make,or to Convert Advances into, Eurodollar Rate Advances shall be suspended.
SECTION 2.09. Optional Conversion of Advances. The Borrower may on-------------------------------
any Business Day, upon notice given to the Administrative Agent not later than11:00 A.M. (New York City time) on the same Business Day as the date of theproposed Conversion in the case of a Conversion of Eurodollar Rate Advances intoBase Rate Advances, and not later than 1:00 P.M. (New York City time) on thethird Business Day prior to the date of the proposed Conversion in the case of aConversion of Base Rate Advances into Eurodollar Rate Advances or of EurodollarRate Advances of one Interest Period into Eurodollar Rate Advances of anotherInterest Period, as the case may be, and subject to the provisions
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of Sections 2.08, 2.09 and 2.12, Convert all Advances of one Type comprising thesame Borrowing into Advances of the other Type; provided, however, that anyConversion of any Eurodollar Rate Advances into Base Rate Advances or intoEurodollar Rate Advances of another Interest Period shall be made on, and onlyon, the last day of an Interest Period for such Eurodollar Rate Advances.Promptly upon receipt from the Borrower of a notice of a proposed Conversionhereunder, the Administrative Agent shall give notice of such proposedConversion to each Lender. Each such notice of a Conversion shall, within therestrictions set forth above, specify (i) the date of such Conversion (whichshall be a Business Day), (ii) the Advances to be Converted, and (iii) if suchConversion is into Eurodollar Rate Advances, the duration of the initialInterest Period for each such Advance. The Borrower may Convert all EurodollarRate Advances of any one Lender into Base Rate Advances of such Lender inaccordance with the provisions of Section 2.12 by complying with the proceduresset forth therein and in this Section 2.09 as though each reference in thisSection 2.09 to Advances of any Type was to such Advances of such Lender. Eachsuch notice of Conversion shall, subject to the provisions of Sections 2.08 and2.12, be irrevocable and binding on the Borrower.
SECTION 2.10. Prepayments of Advances. The Borrower may, upon not-----------------------
less than the same Business Day's notice to the Administrative Agent receivednot later than 11:00 A.M. (New York City time) in the case of Borrowingsconsisting of Base Rate Advances and upon at least three Business Days' noticeto the Administrative Agent received not later than 1:00 P.M. (New York Citytime) in the case of Borrowings consisting of Eurodollar Rate Advances, statingthe proposed date and aggregate principal amount of the prepayment, and if suchnotice is given the Borrower shall, prepay the outstanding principal amounts of
the Advances constituting part of the same Borrowings in whole or ratably inpart, together with accrued interest to the date of such prepayment on theprincipal amount prepaid; provided, however, that (a) each partial prepaymentshall be in an aggregate principal amount of $1,000,000 or an integral multipleof $1,000,000 in excess thereof, and (b) in the case of any such prepayment ofEurodollar Rate Advances, the Borrower shall be obligated to reimburse theLenders in respect thereof pursuant to Section 8.04(b).
SECTION 2.11. Increased Costs. (a) If after the date hereof, due to---------------
either (i) the introduction of or any change (other than any change by way ofimposition or increase of reserve requirements included in the Eurodollar RateReserve Percentage) in or in the interpretation of any law or regulation or (ii)the compliance with any hereafter promulgated guideline or request from anycentral bank or other governmental authority (whether or not having the force oflaw), there shall be any increase in the cost (excluding any allocation ofcorporate overhead) to any Lender (which cost such Lender reasonably determinesin good faith is material) of agreeing to make or making, funding or maintainingEurodollar Rate Advances, then such Lender shall so notify the Borrower promptlyafter such Lender knows of such increased cost and determines that such cost ismaterial and the Borrower shall from time to time, upon demand by such Lender(with a copy of such demand to the Administrative Agent), pay to theAdministrative Agent for the account of such Lender additional amountssufficient to compensate such Lender for such increased cost. A certificate ofsuch Lender as to the amount of such increased cost in reasonable detail andstating the basis upon which such amount has been calculated and certifying thatsuch Lender's method of allocating such costs is fair and reasonable and thatsuch Lender's demand for payment of such costs hereunder is not inconsistentwith its treatment of other borrowers which, as a credit matter, aresubstantially similar to the Borrower and which are subject to similarprovisions, submitted to the Borrower and the Administrative Agent by suchLender, shall be conclusive and binding for all purposes, absent manifest error.
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(b) If, after the date hereof, either (i) the introduction of orchange in or in the interpretation of any law or regulation or (ii) thecompliance by any Lender with any hereafter promulgated guideline or requestfrom any central bank or other governmental authority (whether or not having theforce of law) affects or would affect the amount of capital required or expectedto be maintained by such Lender or any corporation controlling such Lender andthe amount of such capital is materially increased by or based upon theexistence of such Lender's commitment to lend hereunder and other commitments ofthis type, then such Lender shall so notify the Borrower promptly after suchLender makes such determination and, upon demand by such Lender (with a copy ofsuch demand to the Administrative Agent), the Borrower shall pay to such Lenderwithin five days from the date of such demand, from time to time as specified bysuch Lender, additional amounts sufficient to compensate such Lender or suchcorporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existenceof such Lender's commitment to lend hereunder. A certificate of such Lender asto such amount in reasonable detail and stating the basis upon which such amounthas been calculated and certifying that such Lender's method of allocating suchincrease of capital is fair and reasonable and that such Lender's demand forpayment of such increase of capital hereunder is not inconsistent with itstreatment of other borrowers which, as a credit matter, are substantiallysimilar to the Borrower and which are subject to similar provisions, submittedto the Borrower and the Administrative Agent by such Lender, shall be conclusiveand binding for all purposes, absent manifest error.
(c) The Borrower shall not be obligated to pay under this Section2.11 any amounts which relate to costs or increases of capital incurred prior tothe 12 months immediately preceding the date of demand for payment of suchamounts, unless the applicable law, regulation, guideline or request resultingin such costs or increases of capital is imposed retroactively. In the case ofany law, regulation, guideline or request which is imposed retroactively, theLender making demand for payment of any amount under this Section 2.11 shallnotify the Borrower not later than 12 months from the date that such Lendershould reasonably have known of such law, regulation, guideline or request andthe Borrower's obligation to compensate such Lender for such amount iscontingent upon such Lender's so notifying the Borrower; provided, however, thatany failure by such Lender to provide such notice shall not affect theBorrower's obligations under this Section 2.11 with respect to amounts resultingfrom costs or increases of capital incurred after the date which occurs 12months immediately preceding the date on which such Lender notified the Borrowerof such law, regulation, guideline or request.
(d) If any Lender shall subsequently recoup any costs (other thanfrom the Borrower) for which such Lender has theretofore been compensated by theBorrower under this Section 2.11, such Lender shall remit to the Borrower anamount equal to the amount of such recoupment. Amounts required to be paid bythe Borrower pursuant to this Section 2.11 shall be paid in addition to, andwithout duplication of, any amounts required to be paid pursuant to Section2.14.
SECTION 2.12. Illegality. Notwithstanding any other provision of this----------
Agreement, if any Lender shall notify the Administrative Agent that theintroduction of or any change in or in the interpretation of any law orregulation after the date hereof makes it unlawful, or any central bank or othergovernmental authority asserts that it is unlawful, for any Lender or itsEurodollar Lending Office to perform its obligations hereunder to makeEurodollar Rate Advances or to fund or maintain Eurodollar Rate Advanceshereunder, (i) the obligation of such Lender to make, or to Convert Base RateAdvances into, Eurodollar Rate Advances shall be suspended until such Lendershall notify the Administrative Agent, and the Administrative Agent shall notifythe Borrower and the other Lenders (which notice shall
be given promptly after the Administrative Agent knows that the circumstancescausing such suspension no longer exist), that the circumstances causing suchsuspension no longer exist and (ii) the Borrower shall forthwith prepay in fullall Eurodollar Rate Advances of such Lender then outstanding, together withinterest accrued thereon, unless the Borrower, within five Business Days ofnotice from the Administrative Agent or, if permitted by law, on and as of thelast day of the then existing Interest Period for such Eurodollar Rate Advances,Converts all Eurodollar Rate Advances of such Lender then outstanding into BaseRate Advances in accordance with Section 2.09.
SECTION 2.13. Payments and Computations. (a) The Borrower shall make-------------------------
each payment hereunder and under the Notes, if any, not later than 11:00 A.M.(New York City time) on the day when due in U.S. dollars to the AdministrativeAgent at the Administrative Agent's Account in same day funds. TheAdministrative Agent will promptly thereafter cause to be distributed like fundsrelating to the payment of principal or interest or facility fees ratably (otherthan amounts payable pursuant to Sections 2.07, 2.11, 2.14, 8.04 and 8.08) tothe Lenders for the account of their respective Applicable Lending Offices, andlike funds relating to the payment of any other amount payable to any Lender tosuch Lender for the account of its Applicable Lending Office, in each case to beapplied in accordance with the terms of this Agreement. Upon any Assuming Lenderbecoming a Lender hereunder as a result of a Commitment Increase pursuant toSection 2.19 or an extension of the Termination Date pursuant to Section 2.20,and upon the Administrative Agent's receipt of such Lender's AssumptionAgreement and recording of the information contained therein in the Register,from and after the applicable Increase Date or Extension Date, as the case maybe, the Administrative Agent shall make all payments hereunder and under anyNotes issued in connection therewith in respect of the interest assumed therebyto the Assuming Lender. Upon its acceptance of an Assignment and Acceptance andrecording of the information contained therein in the Register pursuant toSection 8.07(d), from and after the effective date specified in such Assignmentand Acceptance, the Administrative Agent shall make all payments hereunder andunder the Notes, if any, issued in connection therewith in respect of theinterest assigned thereby to the Lender assignee thereunder, and the parties tosuch Assignment and Acceptance shall make all appropriate adjustments in suchpayments for periods prior to such effective date directly between themselves.
(b) All computations of interest based on clause (a) or (b) of thedefinition of "Base Rate" shall be made by the Administrative Agent on the basisof a year of 365 or 366 days, as the case may be, and all computations ofinterest based on the Eurodollar Rate or the Federal Funds Rate and of facilityfees shall be made by the Administrative Agent, and all computations ofadditional interest pursuant to Section 2.07 shall be made by a Lender, on thebasis of a year of 360 days, in each case for the actual number of days(including the first day but excluding the last day) occurring in the period forwhich such interest or facility fees are payable. Each determination by theAdministrative Agent (or, in the case of Section 2.07, by a Lender) of aninterest rate hereunder shall be conclusive and binding for all purposes, absent
(c) Whenever any payment hereunder or under the Notes, if any, shallbe stated to be due on a day other than a Business Day, such payment shall bemade on the next succeeding Business Day, and such extension of time shall insuch case be included in the computation of payment of interest or facilityfees, as the case may be; provided, however, that if such extension would causepayment of interest on or principal of Eurodollar Rate Advances to be made inthe next following calendar month, such payment shall be made on the immediatelypreceding Business Day.
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(d) Unless the Administrative Agent shall have received notice fromthe Borrower prior to the date on which any payment is due to the Lendershereunder that the Borrower will not make such payment in full, theAdministrative Agent may assume that the Borrower has made such payment in fullto the Administrative Agent on such date and the Administrative Agent may, inreliance upon such assumption, cause to be distributed to each Lender on suchdue date an amount equal to the amount then due such Lender. If and to theextent that the Borrower shall not have so made such payment in full to theAdministrative Agent, each Lender shall repay to the Administrative Agentforthwith on demand such amount distributed to such Lender together withinterest thereon, for each day from the date such amount is distributed to suchLender until the date such Lender repays such amount to the AdministrativeAgent, at the Federal Funds Rate.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower-----
hereunder or under the Notes, if any, shall be made, in accordance with Section2.13, free and clear of and without deduction for any and all present or futuretaxes, levies, imposts, deductions, charges or withholdings, and all liabilitieswith respect thereto, excluding, in the case of each Lender and theAdministrative Agent, taxes imposed on its income, and franchise taxes imposedon it, by the jurisdiction under the laws of which such Lender or theAdministrative Agent (as the case may be) is organized or any politicalsubdivision thereof and, in the case of each Lender, taxes imposed on itsincome, and franchise taxes imposed on it, by the jurisdiction of such Lender'sApplicable Lending Office or any political subdivision thereof or by any otherjurisdiction in which such Lender or the Administrative Agent is doing businessthat is unrelated to this Agreement (all such non-excluded taxes, levies,imposts, deductions, charges, withholdings and liabilities being hereinafterreferred to as "Taxes"). If the Borrower shall be required by law to deduct anyTaxes from or in respect of any sum payable hereunder to any Lender or theAdministrative Agent, (i) the sum payable shall be increased as may be necessaryso that after making all required deductions (including deductions applicable toadditional sums payable under this Section 2.14) such Lender or theAdministrative Agent (as the case may be) receives an amount equal to the sum itwould have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount deductedto the relevant taxation authority or other authority in accordance withapplicable law.
(b) In addition, the Borrower agrees to pay any present or futurestamp or documentary taxes or any other excise or property taxes, charges orsimilar levies which arise from any payment made hereunder or under the Notes,if any, or from the execution, delivery or registration of, or otherwise withrespect to, this Agreement or the Notes, if any (hereinafter referred to as"Other Taxes").
(c) The Borrower will indemnify each Lender and the AdministrativeAgent for the full amount of Taxes or Other Taxes (including, withoutlimitation, any Taxes or Other Taxes imposed by any jurisdiction on amountspayable under this Section 2.14) paid by such Lender or the Administrative Agent(as the case may be) and any liability (including penalties to the extent notimposed as a result of such Lender's or the Administrative Agent's (as the casemay be) gross negligence or willful misconduct, interest and expenses) arisingtherefrom or with respect thereto, whether or not such Taxes or Other Taxes werecorrectly or legally asserted. This indemnification shall be made within 30 daysfrom the date such Lender or the Administrative Agent (as the case may be) makeswritten demand therefor.
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(d) Within 30 days after the date of any payment of Taxes, theBorrower will furnish to the Administrative Agent, at its address referred to inSection 8.02, the original or a certified copy of a receipt evidencing paymentthereof.
(e) Each Lender that is not created or organized under the laws ofthe United States or a political subdivision thereof shall deliver to theBorrower and the Administrative Agent on or prior to the date of its executionand delivery of this Agreement, and each such Lender that is not a party heretoon the date hereof shall deliver to the Borrower and the Administrative Agent onor prior to the date on which such Lender becomes a Lender pursuant to Section2.19, 2.20 or 8.07 (as the case may be), a true and accurate certificateexecuted in duplicate by a duly authorized officer of such Lender insubstantially the form set out in Exhibit D-1 or D-2 hereto, as applicable, tothe effect that such Lender is eligible under the provisions of an applicabletax treaty concluded by the United States (in which case the certificate shallbe accompanied by two executed copies of Form 1001 (or any successor orsubstitute form or forms) of the Internal Revenue Service (the "IRS") of theUnited States), or under Section 1441(c) or 1442 of the Internal Revenue Code(in which case the certificate shall be accompanied by two copies of IRS Form4224 (or any successor or substitute form or forms) of the IRS), to receive, asof the date hereof or as of the date such party becomes a Lender hereto pursuantto Section 2.19, 2.20 or 8.07 (as the case may be), as appropriate, paymentshereunder without deduction or withholding of United States federal income tax.Each such Lender further agrees to deliver to the Borrower and the
Administrative Agent from time to time, as reasonably requested by the Borroweror the Administrative Agent, and in any case before or promptly upon theoccurrence of any events requiring a change in the most recent certificatepreviously delivered pursuant to this Section 2.14(e), a true and accuratecertificate executed in duplicate by a duly authorized officer of such Lender insubstantially the form set out in Exhibit D-1 or D-2 hereto, as applicable.Further, each Lender that delivers a certificate in the form set out in ExhibitD-1 hereto agrees, to the extent permitted by law, to deliver to the Borrowerand the Administrative Agent within 15 days prior to every third anniversary ofthe date of delivery of the initial IRS Form 1001 by such Lender (or more oftenif required by law) on which this Agreement is still in effect, two accurate andcomplete original signed copies of IRS Form 1001 (or any successor or substituteform or forms required under the Internal Revenue Code or the applicableregulations promulgated thereunder) and a certificate in the form set out insuch Exhibit D-1, and each Lender that delivers a certificate in the form setout in Exhibit D-2 hereto agrees to deliver to the Borrower and theAdministrative Agent, to the extent permitted by law, within 15 days prior tothe beginning of each subsequent taxable year of such Lender (or more often ifrequired by law) during which this Agreement is still in effect, two accurateand complete original signed copies of IRS Form 4224 (or any successor orsubstitute form or forms required under the Internal Revenue Code or theapplicable regulations promulgated thereunder) and a certificate in the form ofsuch Exhibit D-2. Each such certificate shall certify as to one of thefollowing:
(i) that such Lender is eligible to receive payments hereunderwithout deduction or withholding of United States federal income tax;
(ii) that such Lender is not eligible to receive payments hereunderwithout deduction or withholding of United States federal income tax asspecified therein but does not require additional payments thereforpursuant to Section 2.14(a) or (c) because it is eligible and able torecover the full amount of any such deduction or withholding from a sourceother than the Borrower; or
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(iii) that such Lender is not eligible to receive payments hereunderwithout deduction or withholding of United States federal income tax asspecified therein and that it is not eligible and able to recover the fullamount of the same from a source other than the Borrower.
If any form or document referred to in this subsection (e) requires thedisclosure of information, other than information necessary to compute the taxpayable and information required on the date hereof by IRS Form 1001 or 4224,that any Lender reasonably considers to be confidential, such Lender promptlyshall give notice thereof to the Borrower and the Administrative Agent and shallnot be obligated to include in such form or document such confidentialinformation; provided that such Lender certifies to the Borrower that thefailure to disclose such confidential information does not increase the
obligations of the Borrower under this Section 2.14.
(f) Without prejudice to the survival of any other agreement of theBorrower hereunder, the agreements and obligations of the Borrower contained inthis Section 2.14 shall survive the payment in full of principal and interest onall Advances and the termination of this Agreement until such date as allapplicable statutes of limitations (including any extensions thereof) haveexpired with respect to such agreements and obligations of the Borrowercontained in this Section 2.14.
SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain any------------------------
payment (whether voluntary, involuntary, through the exercise of any right ofset-off, or otherwise) on account of the Advances made by it (other thanpursuant to Section 2.07, 2.11, 2.14, 8.04 or 8.08) in excess of its ratableshare of payments on account of the Advances obtained by all the Lenders, suchLender shall forthwith purchase from the other Lenders such participations inthe Advances made by them as shall be necessary to cause such purchasing Lenderto share the excess payment ratably with each of them, provided, however, thatif all or any portion of such excess payment is thereafter recovered from suchpurchasing Lender, such purchase from each Lender shall be rescinded and suchLender shall repay to the purchasing Lender the purchase price to the extent ofsuch recovery, together with an amount equal to such Lender's ratable share(according to the proportion of (i) the amount of such Lender's requiredrepayment to (ii) the total amount so recovered from the purchasing Lender) ofany interest or other amount paid or payable by the purchasing Lender in respectof the total amount so recovered. The Borrower agrees that any Lender sopurchasing a participation from another Lender pursuant to this Section 2.15may, to the fullest extent permitted by law, exercise all its rights of payment(including the right of set-off) with respect to such participation as fully asif such Lender were the direct creditor of the Borrower in the amount of suchparticipation.
SECTION 2.16. Mandatory Assignment by a Lender; Mitigation. If any--------------------------------------------
Lender requests from the Borrower either payment of additional interest onEurodollar Rate Advances pursuant to Section 2.07, or reimbursement forincreased costs pursuant to Section 2.11, or payment of or reimbursement forTaxes pursuant to Section 2.14, or if any Lender notifies the AdministrativeAgent that it is unlawful for such Lender or its Eurodollar Lending Office toperform its obligations hereunder pursuant to Section 2.12, (i) such Lenderwill, upon three Business Days' notice by the Borrower to such Lender and theAdministrative Agent, to the extent not inconsistent with such Lender's internalpolicies and applicable legal and regulatory restrictions, use reasonableefforts to make, fund or maintain its Eurodollar Rate Advances through anotherEurodollar Lending Office of such Lender if (A) as a result thereof theadditional amounts required to be paid pursuant to Section 2.07, 2.11 or 2.14,as applicable, in respect of such Eurodollar Rate Advances would be materiallyreduced or the provisions of Section 2.12 would not apply to such Lender, asapplicable, and (B) as determined by such Lender in good faith
but in its sole discretion, the making or maintaining of such Eurodollar RateAdvances through such other Eurodollar Lending Office would not otherwisematerially and adversely affect such Eurodollar Rate Advances or such Lender and(ii) unless such Lender has theretofore taken steps to remove or cure, and hasremoved or cured, the conditions creating such obligation to pay such additionalamounts or the circumstances described in Section 2.12, the Borrower maydesignate an Eligible Assignee to purchase for cash (pursuant to an Assignmentand Acceptance) all, but not less than all, of the Advances then owing to suchLender and all, but not less than all, of such Lender's rights and obligationshereunder, without recourse to or warranty by, or expense to, such Lender, for apurchase price equal to the outstanding principal amount of each such Advancethen owing to such Lender plus any accrued but unpaid interest thereon and anyaccrued but unpaid facility fees owing thereto and, in addition, (A) alladditional costs reimbursements, expense reimbursements and indemnities, if any,owing in respect of such Lender's Commitment hereunder, and all other accruedand unpaid amounts owing to such Lender hereunder, at such time shall be paid tosuch Lender and (B) if such Eligible Assignee is not otherwise a Lender at suchtime, the applicable processing and recordation fee under Section 8.07(a) forsuch assignment shall have been paid.
SECTION 2.17. Evidence of Debt. (a) Each Lender shall maintain in----------------
accordance with its usual practice an account or accounts evidencing theindebtedness of the Borrower to such Lender resulting from each Advance owing tosuch Lender from time to time, including the amounts of principal and interestpayable and paid to such Lender from time to time hereunder. The Borroweragrees that upon notice by any Lender to the Borrower (with a copy of suchnotice to the Administrative Agent) to the effect that a promissory note orother evidence of indebtedness is required or appropriate in order for suchLender to evidence (whether for purposes of pledge, enforcement or otherwise)the Advances owing to, or to be made by, such Lender, the Borrower shallpromptly execute and deliver to such Lender a promissory note or other evidenceof indebtedness, in form and substance reasonably satisfactory to the Borrowerand such Lender (each a "Note"), payable to the order of such Lender in aprincipal amount equal to the Commitment of such Lender; provided, however, thatthe execution and delivery of such promissory note or other evidence ofindebtedness shall not be a condition precedent to the making of any Advanceunder this Agreement.
(b) The Register maintained by the Administrative Agent pursuant toSection 8.07(c) shall include a control account, and a subsidiary account foreach Lender, in which accounts (taken together) shall be recorded (i) the dateand amount of each Borrowing made hereunder, the Type of Advances comprisingsuch Borrowing and, if appropriate, the Interest Period applicable thereto, (ii)the terms of each Assumption Agreement and each Assignment and Acceptancedelivered to and accepted by it, (iii) the amount of any principal or interestdue and payable or to become due and payable from the Borrower to each Lenderhereunder, and (iv) the amount of any sum received by the Administrative Agent
from the Borrower hereunder and each Lender's share thereof.
(c) Entries made in good faith by the Administrative Agent in theRegister pursuant to subsection (b) above, and by each Lender in its account oraccounts pursuant to subsection (a) above, shall be prima facie evidence of theamount of principal and interest due and payable or to become due and payablefrom the Borrower to, in the case of the Register, each Lender and, in the caseof such account or accounts, such Lender, under this Agreement, absent manifesterror; provided, however, that the failure of the Administrative Agent or suchLender to make an entry, or any finding that an entry is
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incorrect, in the Register or such account or accounts shall not limit orotherwise affect the obligations of the Borrower under this Agreement.
SECTION 2.18. Use of Proceeds. The proceeds of the Advances shall be---------------
available (and the Borrower agrees that it shall use such proceeds) to supportthe obligations of the Borrower in respect of commercial paper issued by theBorrower and/or for other general corporate purposes of the Borrower and itssubsidiaries.
SECTION 2.19. Increase in the Aggregate Commitments. (a) The Borrower-------------------------------------
may, at any time but in any event not more than once in any calendar year priorto the Termination Date, by notice to the Administrative Agent, request that theaggregate amount of the Commitments be increased by an amount of $100,000,000 oran integral multiple of $5,000,000 in excess thereof (each a "CommitmentIncrease") to be effective as of a date that is at least 90 days prior to thescheduled Termination Date then in effect (the "Increase Date") as specified inthe related notice to the Administrative Agent; provided, however, that (i) inno event shall the aggregate amount of the Commitments at any time exceed$5,000,000,000, (ii) on the date of any request by the Borrower for a CommitmentIncrease and at all times thereafter to and including the related Increase Date,the Public Debt Rating shall be at least A- by S&P and at least A3 by Moody'sand (iii) no Event of Default, or event that with the giving of notice orpassage of time or both would constitute an Event of Default, shall haveoccurred and be continuing as of the date of such request or as of theapplicable Increase Date, or shall occur as a result thereof.
(b) The Administrative Agent shall promptly notify the Lenders of arequest by the Borrower for a Commitment Increase, which notice shall include(i) the proposed amount of such requested Commitment Increase, (ii) the proposedIncrease Date and (iii) the date by which Lenders wishing to participate in theCommitment Increase must commit to an increase in the amount of their respectiveCommitments (the "Commitment Date"). Each Lender that is willing to participatein such requested Commitment Increase (each an "Increasing Lender") shall givewritten notice to the Administrative Agent on or prior to the Commitment Date ofthe amount by which it is willing to increase its Commitment. If the Lenders
notify the Administrative Agent that they are willing to increase the amount oftheir respective Commitments by an aggregate amount that exceeds the amount ofthe requested Commitment Increase, the requested Commitment Increase shall beallocated among the Lenders willing to participate therein in such amounts asare agreed between the Borrower and the Administrative Agent.
(c) Promptly following each Commitment Date, the Administrative Agentshall notify the Borrower as to the amount, if any, by which the Lenders arewilling to participate in the requested Commitment Increase. If the aggregateamount by which the Lenders are willing to participate in any requestedCommitment Increase on any such Commitment Date is less than the requestedCommitment Increase, then the Borrower may extend offers to one or more EligibleAssignees to participate in any portion of the requested Commitment Increasethat has not been committed to by the Lenders as of the applicable CommitmentDate; provided, however, that the Commitment of each such Eligible Assigneeshall be in an amount of $25,000,000 or an integral multiple of $1,000,000 inexcess thereof.
(d) On each Increase Date, each Eligible Assignee that accepts anoffer to participate in a requested Commitment Increase in accordance withSection 2.19(c) (each such Eligible Assignee and
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each Eligible Assignee that agrees to an extension of the Termination Date inaccordance with Section 2.20(c), an "Assuming Lender") shall become a Lenderparty to this Agreement as of such Increase Date and the Commitment of eachIncreasing Lender for such requested Commitment Increase shall be so increasedby such amount (or by the amount allocated to such Lender pursuant to the lastsentence of Section 2.19(b)) as of such Increase Date; provided, however, thatthe Administrative Agent shall have received on or before such Increase Date thefollowing, each dated such date:
(i) (A) certified copies of resolutions of the Board of Directorsof the Borrower or the Executive Committee of such Board approving theCommitment Increase and the corresponding modifications to this Agreementand (B) an opinion of counsel for the Borrower (which may be in-housecounsel), in substantially the form of Exhibit C hereto;
(ii) an assumption agreement from each Assuming Lender, if any, inform and substance satisfactory to the Borrower and the AdministrativeAgent (each an "Assumption Agreement"), duly executed by such EligibleAssignee, the Administrative Agent and the Borrower; and
(iii) confirmation from each Increasing Lender of the increase inthe amount of its Commitment in a writing satisfactory to the Borrower andthe Administrative Agent.
On each Increase Date, upon fulfillment of the conditions set forth in theimmediately preceding sentence of this Section 2.19(d), the Administrative Agent
shall notify the Lenders (including, without limitation, each Assuming Lender)and the Borrower, on or before 1:00 P.M. (New York City time), by telecopier ortelex, of the occurrence of the Commitment Increase to be effected on suchIncrease Date and shall record in the Register the relevant information withrespect to each Increasing Lender and each Assuming Lender on such date.
SECTION 2.20. Extension of Termination Date. (a) At least 45 days but-----------------------------
not more than 75 days prior to the next Anniversary Date, the Borrower, bywritten notice to the Administrative Agent, may request an extension of theTermination Date in effect at such time by one calendar year from its thenscheduled expiration; provided, however, that, if the Borrower does not requestan extension of the Termination Date in a timely manner prior to any AnniversaryDate it may, but shall not be obligated to, request that the Termination Date beextended for two consecutive calendar years from its then scheduled expirationby making a request therefor in a timely manner prior to the next succeedingAnniversary Date. The Administrative Agent shall promptly notify each Lender ofsuch request, and each Lender shall in turn, in its sole discretion, not laterthan 30 days prior to such next Anniversary Date, notify the Borrower and theAdministrative Agent in writing as to whether such Lender will consent to suchextension. If any Lender shall fail to notify the Administrative Agent and theBorrower in writing of its consent to any such request for extension of theTermination Date at least 30 days prior to the next Anniversary Date, suchLender shall be deemed to be a Non-Consenting Lender with respect to suchrequest. The Administrative Agent shall notify the Borrower not later than 25days prior to such next Anniversary Date of the decision of the Lendersregarding the Borrower's request for an extension of the Termination Date.
(b) If all of the Lenders consent in writing to any such request inaccordance with subsection (a) of this Section 2.20, the Termination Date ineffect at such time shall, effective as at such
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next Anniversary Date (the "Extension Date"), be extended for one calendar yearor two calendar years, as properly requested; provided that on each ExtensionDate, no Event of Default, or event that with the giving of notice or passage oftime or both would constitute an Event of Default, shall have occurred and becontinuing, or shall occur as a consequence thereof. If less than all of theLenders consent in writing to any such request in accordance with subsection (a)of this Section 2.20, the Termination Date in effect at such time shall,effective as at the applicable Extension Date, be extended as to those Lendersthat so consented (each a "Consenting Lender") but shall not be extended as toany other Lender (each a "Non-Consenting Lender"). To the extent that theTermination Date is not extended as to any Lender pursuant to this Section 2.20and the Commitment of such Lender is not assumed in accordance with subsection(c) of this Section 2.20 on or prior to the applicable Extension Date, theCommitment of such Non-Consenting Lender shall automatically terminate in wholeon such unextended Termination Date without any further notice or other actionby the Borrower, such Lender or any other Person; provided that such Non-
Consenting Lender's rights under Sections 2.11, 2.14, 8.04 and 8.08, and itsobligations under Section 7.05, shall survive the Termination Date for suchLender as to matters occurring prior to such date. It is understood and agreedthat no Lender shall have any obligation whatsoever to agree to any request madeby the Borrower for any requested extension of the Termination Date.
(c) If less than all of the Lenders consent to any such requestpursuant to subsection (a) of this Section 2.20, the Borrower may arrange forone or more Consenting Lenders or other Eligible Assignees as Assuming Lendersto assume, effective as of the Extension Date, any Non-Consenting Lender'sCommitment and all of the obligations of such Non-Consenting Lender under thisAgreement thereafter arising, without recourse to or warranty by, or expense to,such Non-Consenting Lender; provided, however, that the amount of the Commitmentof any such Assuming Lender as a result of such substitution shall in no eventbe less than $25,000,000 unless the amount of the Commitment of such Non-Consenting Lender is less than $25,000,000, in which case such Assuming Lendershall assume all of such lesser amount; and provided further that:
(i) any such Consenting Lender or Assuming Lender shall have paidto such Non-Consenting Lender (A) the aggregate principal amount of, andany interest accrued and unpaid to the effective date of the assignment on,the outstanding Advances, if any, of such Non-Consenting Lender plus (B)any accrued but unpaid facility fees owing to such Non-Consenting Lender asof the effective date of such assignment;
(ii) all additional costs reimbursements, expense reimbursements andindemnities payable to such Non-Consenting Lender, and all other accruedand unpaid amounts owing to such Non-Consenting Lender hereunder, as of theeffective date of such assignment shall have been paid to such Non-Consenting Lender; and
(iii) with respect to any such Assuming Lender, the applicableprocessing and recordation fee required under Section 8.07(a) for suchassignment shall have been paid;
provided further that such Non-Consenting Lender's rights under Sections 2.11,2.14, 8.04 and 8.08, and its obligations under Section 7.05, shall survive suchsubstitution as to matters occurring prior to the date of substitution. Atleast three Business Days prior to any Extension Date, (A) each such AssumingLender, if any, shall have delivered to the Borrower and the AdministrativeAgent an Assumption Agreement, duly executed by such Assuming Lender, such Non-Consenting Lender, the Borrower and
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the Administrative Agent, (B) any such Consenting Lender shall have deliveredconfirmation in writing satisfactory to the Borrower and the AdministrativeAgent as to the increase in the amount of its Commitment and (C) each Non-Consenting Lender being replaced pursuant to this Section 2.20 shall havedelivered to the Administrative Agent any Note or Notes held by such Non-
Consenting Lender. Upon the payment or prepayment of all amounts referred to inclauses (i), (ii) and (iii) of the immediately preceding sentence, each suchConsenting Lender or Assuming Lender, as of the Extension Date, will besubstituted for such Non-Consenting Lender under this Agreement and shall be aLender for all purposes of this Agreement, without any further acknowledgment byor the consent of the other Lenders, and the obligations of each such Non-Consenting Lender hereunder shall, by the provisions hereof, be released anddischarged.
(d) If all of the Lenders (after giving effect to any assignmentspursuant to subsection (b) of this Section 2.20) consent in writing to arequested extension (whether by execution or delivery of an Assumption Agreementor otherwise) not later than one Business Day prior to such Extension Date, theAdministrative Agent shall so notify the Borrower, and, so long as no Event ofDefault, or event that with the giving of notice or passage of time or bothwould constitute an Event of Default, shall have occurred and be continuing asof such Extension Date, or shall occur as a consequence thereof, the TerminationDate then in effect shall be extended for the additional one-year period or two-year period, as the case may be, as described in subsection (a) of this Section2.20, and all references in this Agreement, and in the Notes, if any, to the"Termination Date" shall, with respect to each Consenting Lender and eachAssuming Lender for such Extension Date, refer to the Termination Date as soextended. Promptly following each Extension Date, the Administrative Agent shallnotify the Lenders (including, without limitation, each Assuming Lender) of theextension of the scheduled Termination Date in effect immediately prior theretoand shall thereupon record in the Register the relevant information with respectto each such Consenting Lender and each such Assuming Lender.
ARTICLE IIICONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01.-----------------------------------------------------
Section 2.01 of this Agreement shall become effective on and as of the firstdate (the "Effective Date") on which all of the following conditions precedenthave been satisfied or waived in accordance with Section 8.01:
(a) the Administrative Agent shall have received on or before theEffective Date the following, each dated the Effective Date, in form andsubstance satisfactory to the Administrative Agent: (i) certified copiesof the resolutions of the Board of Directors of the Borrower or theExecutive Committee of such Board authorizing the execution and delivery ofthis Agreement, and approving all documents evidencing other necessarycorporate action and governmental approvals, if any, with respect to thisAgreement; (ii) a certificate of the Secretary or an Assistant Secretary ofthe Borrower certifying the name and true signature of the officer of theBorrower executing this Agreement on its behalf; (iii) an opinion of DavidK. Thompson, Esq., Senior Vice President-Assistant General Counsel of theBorrower, in substantially the form of Exhibit C hereto; and (iv) anopinion of Shearman & Sterling, counsel for the Administrative Agent.
(b) all consents and approvals of any governmental or regulatoryauthority and any other third party necessary in connection with thisAgreement or the consummation of the transactions contemplated hereby shallhave been obtained and shall remain in effect.
(c) there shall have occurred no material adverse change in thebusiness, financial condition or operations of (i) Disney and itssubsidiaries, taken as a whole, since September 30, 1995, except asdisclosed in periodic or other reports filed by Disney and its subsidiariesduring the period from September 30, 1995 to the date of this Agreementpursuant to Section 13 of the Securities Exchange Act of 1934, as amended,copies of which have been furnished to the Initial Lenders prior to thedate of this Agreement, or (ii) the Borrower and its subsidiaries, taken asa whole, since June 30, 1996, except as disclosed in reports filed by theBorrower and its subsidiaries, if any, during the period from June 30, 1996to the date of this Agreement pursuant to Section 13 of the SecuritiesExchange Act of 1934, as amended, copies of which have been furnished tothe Initial Lenders prior to the date of this Agreement.
(d) the Borrower shall have paid or prepaid all amounts owing underthe Existing Credit Agreements, and all commitments of the lendersthereunder shall have been terminated.
(e) the Borrower shall have notified each Lender and theAdministrative Agent in writing as to the proposed Effective Date at leastthree Business Days prior to the occurrence thereof.
(f) all of the representations and warranties contained in Section4.01 shall be correct in all material respects on and as of the EffectiveDate, before and after giving effect to such date, as though made on and asof the Effective Date (except to the extent that such representations andwarranties relate to an earlier date, in which case such representationsand warranties shall have been correct in all material respects on and asof such earlier date).
(g) no event shall have occurred and be continuing, or shall resultfrom the occurrence of the Effective Date, that constitutes an Event ofDefault or would constitute an Event of Default but for the requirementthat notice be given or time elapse or both.
SECTION 3.02. Conditions Precedent to Each Borrowing. The obligation--------------------------------------
of each Lender to make an Advance on the occasion of each Borrowing (includingthe initial Borrowing) shall be subject to the further conditions precedent thatthe Effective Date shall have occurred and on the date of such Borrowing thefollowing statements shall be true (and each of the giving of the applicableNotice of Borrowing and the acceptance by the Borrower of the proceeds of suchBorrowing shall constitute a representation and warranty by the Borrower that on
the date of such Borrowing such statements are true):
(a) the representations and warranties contained in Section 4.01 arecorrect in all material respects on and as of the date of such Borrowing,before and after giving effect to such Borrowing and to the application ofthe proceeds therefrom, as though made on and as of such date (except tothe extent that such representations and warranties relate to an earlierdate, in which case such representations and warranties shall have beencorrect in all material respects on and as of such earlier date); and
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(b) no event has occurred and is continuing, or would result from suchBorrowing or from the application of the proceeds therefrom, whichconstitutes an Event of Default or would constitute an Event of Default butfor the requirement that notice be given or time elapse or both.
SECTION 3.03. Determinations Under Section 3.01. For purposes of---------------------------------
determining compliance with the conditions specified in Section 3.01, eachLender shall be deemed to have consented to, approved or accepted or to besatisfied with each document or other matter required thereunder to be consentedto or approved by or acceptable or satisfactory to the Lenders unless an officerof the Administrative Agent responsible for the transactions contemplated bythis Agreement shall have received notice from such Lender prior to the datethat the Borrower, by notice to the Lenders, designates as the proposedEffective Date, specifying its objection thereto. The Administrative Agentshall promptly notify the Lenders of the occurrence of the Effective Date.
ARTICLE IVREPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The----------------------------------------------
Borrower represents and warrants as of the Effective Date and from time to timethereafter as required under this Agreement as follows:
(a) The Borrower is a corporation duly organized, validly existing andin good standing under the laws of the State of Delaware. The Borrower andeach of the Significant Subsidiaries are duly qualified and in goodstanding as foreign corporations authorized to do business in eachjurisdiction (other than the respective jurisdictions of theirincorporation) in which the nature of their respective activities or thecharacter of the properties they own or lease make such qualificationnecessary and in which the failure so to qualify would have a materialadverse effect on the financial condition or operations of the Borrower andits subsidiaries, taken as a whole.
(b) The execution, delivery and performance by the Borrower of this
Agreement and each of the Notes, if any, delivered hereunder are within theBorrower's corporate powers, have been duly authorized by all necessarycorporate action, and do not contravene (i) the Borrower's charter or by-laws or (ii) any law, rule, regulation, order, writ, judgment, injunction,decree, determination or award or any material contractual restrictionbinding on or affecting the Borrower, Disney or ABC; no authorization orapproval or other action by, and no notice to or filing with, anygovernmental authority or regulatory body is required for the dueexecution, delivery and performance by the Borrower of this Agreement orthe Notes, if any; and this Agreement is and each of the Notes, whendelivered hereunder, will be the legal, valid and binding obligation of theBorrower, enforceable against the Borrower in accordance with theirrespective terms, subject to applicable bankruptcy, reorganization,insolvency, moratorium or similar laws affecting creditors' rightsgenerally and general principles of equity.
(c) (i) At any time prior to the date on which the Borrower firstdelivers the audited financial statements of the Borrower and itssubsidiaries pursuant to Section 5.01(e)(ii), Disney's most recent annualreport on Form 10-K containing the consolidated balance sheet of Disney andits subsidiaries, and the related consolidated statements of income and ofcash flows of Disney
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and its subsidiaries, copies of which have been furnished to each InitialLender prior to the date of this Agreement, fairly present the consolidatedfinancial condition of Disney and its subsidiaries as at the date of suchbalance sheet and the consolidated results of operations of Disney and itssubsidiaries for the fiscal year ended on such date, all in accordance withgenerally accepted accounting principles consistently applied, and (ii) atany time thereafter, the Borrower's most recent annual report on Form 10-Kcontaining the consolidated balance sheet of the Borrower and itssubsidiaries, and the related consolidated statements of income and of cashflows of the Borrower and its subsidiaries, copies of which have beenfurnished to each Lender pursuant to Section 5.01(e)(ii), fairly presentthe consolidated financial condition of the Borrower and its subsidiariesas at the date of such balance sheet and the consolidated results ofoperations of the Borrower and its subsidiaries for the fiscal year endedon such date, all in accordance with generally accepted accountingprinciples consistently applied.
(d) There is no pending or, to the Borrower's knowledge, threatenedclaim, action or proceeding affecting the Borrower or any of itssubsidiaries which could reasonably be expected to adversely affect thefinancial condition or operations of the Borrower and its subsidiaries,taken as a whole, or which could reasonably be expected to affect thelegality, validity or enforceability of this Agreement; and to theBorrower's knowledge, the Borrower and each of its subsidiaries havecomplied, and are in compliance, with all applicable laws, rules,
regulations, permits, orders, consent decrees and judgments, except for anysuch matters which have not had, and would not reasonably be expected tohave, a material adverse effect on the financial condition or operations ofthe Borrower and its subsidiaries, taken as a whole.
(e) The Borrower and the ERISA Affiliates have not incurred and arenot reasonably expected to incur any material liability in connection withtheir Single Employer Plans or Multiple Employer Plans, other than ordinaryliabilities for benefits; neither the Borrower nor any ERISA Affiliate hasincurred or is reasonably expected to incur any material withdrawalliability (as defined in Part I of Subtitle E of Title IV of ERISA) to anyMultiemployer Plan; and no Multiemployer Plan of the Borrower or any ERISAAffiliate is reasonably expected to be in reorganization or to beterminated, within the meaning of Title IV of ERISA.
SECTION 4.02. Additional Representations and Warranties of the------------------------------------------------
Borrower as of Each Increase Date and Each Extension Date. The Borrower---------------------------------------------------------represents and warrants on each Increase Date and each Extension Date (and at noother time) that, as of each such date, the following statements shall be true:
(a) there has been no material adverse change in the business,financial condition or operations of the Borrower and its subsidiaries,taken as a whole, since the date of the audited financial statements of theBorrower and its subsidiaries most recently delivered to the Lenderspursuant to Section 5.01(e)(ii) prior to the applicable Increase Date orExtension Date, as the case may be (except as disclosed in periodic orother reports filed by the Borrower and its subsidiaries pursuant toSection 13 of the Securities Exchange Act of 1934, as amended, during theperiod from the date of the most recently delivered audited financialstatements of the Borrower and its subsidiaries pursuant to Section5.01(e)(ii) to the date of the request for an increase in the aggregateCommitments related to such Increase Date or for an extension of theTermination Date then in effect related to such Extension Date, as the casemay be); and
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(b) the representations and warranties contained in Section 4.01 arecorrect in all material respects on and as of such date, as though made onand as of such date (except to the extent that such representations andwarranties relate to an earlier date, in which case such representationsand warranties shall have been correct in all material respects on and asof such earlier date).
SECTION 5.01. Affirmative Covenants. So long as any Advance shall---------------------
remain unpaid or any Lender shall have any Commitment hereunder, the Borrowerwill, unless the Majority Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its-------------------------
subsidiaries to comply, in all material respects with all applicable laws,rules, regulations, permits, orders, consent decrees and judgments bindingon the Borrower and its subsidiaries the failure with which to comply wouldhave a material adverse effect on the financial condition or operations ofthe Borrower and its subsidiaries, taken as a whole.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its---------------------
subsidiaries to pay and discharge, before the same shall become delinquent,if the failure to so pay and discharge would have a material adverse effecton the financial condition or operations of the Borrower and itssubsidiaries, taken as a whole, (i) all taxes, assessments and governmentalcharges or levies imposed upon it or upon its property, and (ii) all lawfulclaims which, if unpaid, will by law become a Lien upon its property;provided, however, that neither the Borrower nor any of its subsidiariesshall be required to pay or discharge any such tax, assessment, charge,levy or claim which is being contested in good faith and by properproceedings and as to which appropriate reserves are being maintained inaccordance with GAAP.
(c) Preservation of Corporate Existence, Etc. Subject to Section----------------------------------------
5.02(a), preserve and maintain, and cause each of Disney and ABC topreserve and maintain, its corporate existence, rights (charter andstatutory) and franchises; provided, however, that none of the Borrower,Disney or ABC shall be required to preserve any right or franchise if theloss thereof would not have a material adverse effect on the business,financial condition or operations of the Borrower and its subsidiaries,taken as a whole; and provided further, however, that neither Disney norABC shall be required to preserve its corporate existence if the lossthereof would not have a material adverse effect on the business, financialcondition or operations of the Borrower and its subsidiaries, taken as awhole.
(d) Maintenance of Interest Coverage Ratio. Maintain as of the last--------------------------------------
day of each fiscal quarter of the Borrower, commencing with the firstfiscal quarter of the Borrower following the Effective Date, a ratio of (i)Consolidated EBITDA for the Measurement Period ending on such day to (ii)Consolidated Interest Expense for the Measurement Period ending on suchday, of not less than 3 to 1.
(e) Reporting Requirements. Furnish to the Administrative Agent, on----------------------
behalf of the Lenders:
(i) as soon as available and in any event within 50 days afterthe end of each of the first three quarters of each fiscal year of theBorrower, the Borrower's quarterly report to shareholders on Form 10-Qas filed with the Securities and Exchange Commission (the "SEC"), ineach case containing a consolidated balance sheet of the Borrower andits subsidiaries as of the end of such quarter and consolidatedstatements of income and of cash flows of the Borrower and itssubsidiaries for the period commencing at the end of the previousfiscal year and ending with the end of such quarter, and a certificateof any of the Borrower's Chairman of the Board of Directors,President, Chief Financial Officer, Treasurer, Assistant Treasurer orController (A) stating that no Event of Default, or event that withthe giving of notice or passage of time or both would constitute anEvent of Default, has occurred and is continuing and (B) containing aschedule which shall set forth the computations used by the Borrowerin determining compliance with the covenant contained in Section5.01(d);
(ii) as soon as soon as available and in any event within 100days after the end of each fiscal year of the Borrower, a copy of theBorrower's annual report to shareholders on Form 10-K as filed withthe SEC, in each case containing consolidated financial statements ofthe Borrower and its subsidiaries for such year and a certificate ofany of the Borrower's Chairman of the Board of Directors, President,Chief Financial Officer, Treasurer, Assistant Treasurer or Controller(A) stating that no Event of Default, or event that with the giving ofnotice or passage of time or both would constitute an Event ofDefault, has occurred and is continuing and (B) containing a schedulewhich shall set forth the computations used by the Borrower indetermining compliance with the covenant contained in Section 5.01(d);
(iii) promptly after the Borrower obtains actual knowledge ofthe occurrence of each Event of Default, and each event that with thegiving of notice or passage of time or both would constitute an Eventof Default, a statement of any of the Borrower's Chairman of the Boardof Directors, President, Chief Financial Officer, Treasurer, AssistantTreasurer or Controller setting forth details of such Event of Defaultor event continuing on the date of such statement, and the actionwhich the Borrower has taken and proposes to take with respectthereto;
(iv) promptly after the commencement thereof, notice of anyactions, suits and proceedings before any court or governmentaldepartment, commission, board, bureau, agency or instrumentality,domestic or foreign, affecting the Borrower or any of its subsidiariesof the type described in Section 4.01(d);
(v) promptly after the Borrower obtains actual knowledgethereof, written notice of any pending or threatened EnvironmentalClaim against the Borrower or any of its subsidiaries or any of theirrespective properties which could reasonably be expected to materiallyand adversely affect the financial condition or operations of theBorrower and its subsidiaries, taken as a whole;
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(vi) promptly after the Borrower obtains actual knowledge of theoccurrence of any ERISA Event which could reasonably be expected tomaterially and adversely affect the financial condition or operationsof the Borrower and its subsidiaries, taken as a whole, a statement ofany of the Borrower's Chairman of the Board of Directors, President,Chief Financial Officer, Treasurer, Assistant Treasurer or Controllerdescribing such ERISA Event and the action, if any, which the Borrowerhas taken and proposes to take with respect thereto;
(vii) promptly after receipt thereof by the Borrower or anyERISA Affiliate from the sponsor of a Multiemployer Plan, a copy ofeach notice received by the Borrower or any ERISA Affiliate concerning(A) the imposition of withdrawal liability (as defined in Part I ofSubtitle E of Title IV of ERISA) by a Multiemployer Plan, whichwithdrawal liability could reasonably be expected to materially andadversely affect the financial condition or operations of the Borrowerand its subsidiaries, taken as a whole, (B) the reorganization ortermination, within the meaning of Title IV of ERISA, of anyMultiemployer Plan, which reorganization or termination couldreasonably be expected to materially adversely affect the financialcondition or operations of the Borrower and its subsidiaries, taken asa whole, or (C) the amount of liability incurred, or which may beincurred, by the Borrower or any ERISA Affiliate in connection withany event described in subclause (vii)(A) or (vii)(B) above; and
(viii) such other material information reasonably related toany Lender's credit analysis of the Borrower or any of itssubsidiaries as any Lender through the Administrative Agent may fromtime to time reasonably request.
SECTION 5.02. Negative Covenant. So long as any Advance shall remain-----------------
unpaid or any Lender shall have any Commitment hereunder, the Borrower will not,without the written consent of the Majority Lenders:
(a) Mergers, Etc. Merge or consolidate with or into, or convey,------------
transfer, lease or otherwise dispose of (whether in one transaction or in aseries of transactions) all or substantially all of the assets of theBorrower and its subsidiaries, taken as a whole (whether now owned or
hereafter acquired), to, any Person, or permit any of its subsidiaries todo so, unless (i) immediately after giving effect to such proposedtransaction, no Event of Default or event which, with the giving of noticeor lapse of time, or both, would constitute an Event of Default would existand (ii) in the case of any such merger to which the Borrower is a party,the Borrower is the surviving corporation or the Person into which theBorrower shall be merged or formed by any such consolidation shall be acorporation organized and existing under the laws of the United States orany State thereof and shall assume the Borrower's obligations hereunder andunder the Notes, if any, in an agreement or instrument reasonablysatisfactory in form and substance to the Majority Lenders.
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ARTICLE VIEVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events-----------------
("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Advance whenthe same becomes due and payable; or the Borrower shall fail to pay anyinterest on any Advance or any fee or other amount payable under thisAgreement, in each case within three Business Days after such interest, feeor other amount becomes due and payable; or
(b) Any representation or warranty made by the Borrower herein or bythe Borrower (or any of its officers) delivered in writing and identifiedas delivered in connection with this Agreement shall prove to have beenincorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe any covenantcontained in Section 5.01(d), Section 5.01(e)(iii) or Section 5.02; or
(d) The Borrower shall fail to perform or observe any other term,covenant or agreement contained in this Agreement on its part to beperformed or observed if the failure to perform or observe such other term,covenant or agreement shall remain unremedied for 30 days after writtennotice thereof shall have been given to the Borrower by the AdministrativeAgent or any Lender; or
(e) The Borrower or any of its subsidiaries shall fail to pay anyprincipal of or premium or interest on any Debt which is outstanding in aprincipal amount of at least $250,000,000 in the aggregate (but excludingDebt arising hereunder) of the Borrower or such subsidiary (as the case maybe), when the same becomes due and payable (whether by scheduled maturity,required prepayment, acceleration, demand or otherwise), and such failure(i) shall continue after the applicable grace period, if any, specified inthe agreement or instrument relating to such Debt and (ii) shall not have
been cured or waived; or any other event shall occur or condition shallexist under any agreement or instrument relating to any such Debt and shallcontinue after the applicable grace period, if any, specified in suchagreement or instrument, if the effect of such event or condition is toaccelerate, or to permit the acceleration of, the maturity of such Debt; orany such Debt shall be declared to be due and payable, or required to beprepaid (other than by a regularly scheduled required prepayment),redeemed, purchased or defeased, or an offer to prepay, redeem, purchase ordefease such Debt shall be required to be made, in each case prior to thestated maturity thereof; or
(f) The Borrower or any Material Subsidiary shall generally not payits debts as such debts become due, or shall admit in writing its inabilityto pay its debts generally, or shall make a general assignment for thebenefit of creditors; or any proceeding shall be instituted by or againstthe Borrower or any Material Subsidiary seeking to adjudicate it a bankruptor insolvent, or seeking liquidation, winding up, reorganization,arrangement, adjustment, protection, relief, or composition of it or itsdebts under any law relating to bankruptcy, insolvency or reorganization orrelief of debtors, or seeking the entry of an order for relief or theappointment of a receiver, trustee, custodian or other similar official forit or for substantially all of its
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property and, in the case of any such proceeding instituted against it (butnot instituted by it), either such proceeding shall remain undismissed orunstayed for a period of 60 days or any of the actions sought in suchproceeding (including, without limitation, the entry of an order for reliefagainst, or the appointment of a receiver, trustee, custodian or othersimilar official for, it or for any substantial part of its property) shalloccur; or the Borrower or any Material Subsidiary shall take any corporateaction to authorize any of the actions set forth above in this subsection(f); or
(g) Any money judgment, writ or warrant of attachment or similarprocess against the Borrower, any Material Subsidiary or any of theirrespective assets involving in any case an amount in excess of $100,000,000is entered and shall remain undischarged, unvacated, unbonded or unstayedfor a period of 30 days or, in any case, within five days of any pendingsale or disposition of any asset pursuant to any such process;
then, and in any such event, the Administrative Agent (i) shall at the request,or may with the consent, of the Majority Lenders, by notice to the Borrower,declare the obligation of each Lender to make Advances to be terminated,whereupon the same shall forthwith terminate, and (ii) shall at the request, ormay with the consent, of the Majority Lenders, by notice to the Borrower,declare the Advances, all interest thereon and all other amounts payable underthis Agreement to be forthwith due and payable, whereupon the Advances, all suchinterest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of whichare hereby expressly waived by the Borrower; provided, however, that in theevent of an actual or deemed entry of an order for relief with respect to theBorrower under the Federal Bankruptcy Code, (A) the obligation of each Lender tomake Advances shall automatically be terminated and (B) the Advances, all suchinterest and all such amounts shall automatically become and be due and payable,without presentment, demand, protest or notice of any kind, all of which arehereby expressly waived by the Borrower.
ARTICLE VIITHE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. (a) Each Lender hereby------------------------
appoints and authorizes the Administrative Agent to take such action as agent onits behalf and to exercise such powers under this Agreement as are delegated tothe Administrative Agent by the terms hereof, together with such powers as arereasonably incidental thereto. As to any matters not expressly provided for bythis Agreement (including, without limitation, enforcement of this Agreement orcollection of the Advances), the Administrative Agent shall not be required toexercise any discretion or take any action, but shall be required to act or torefrain from acting (and shall be fully protected in so acting or refrainingfrom acting) upon the instructions of the Majority Lenders, and suchinstructions shall be binding upon all Lenders and all holders of Notes;provided, however, that the Administrative Agent shall not be required to takeany action which exposes the Administrative Agent to personal liability or whichis contrary to this Agreement or applicable law. The Administrative Agent agreesto give to each Lender prompt notice of each notice given to it by the Borrowerpursuant to the terms of this Agreement.
(b) The Co-Administrative Agents shall have no duties under thisAgreement other than those afforded to them in their capacities as Lenders, andeach Lender hereby acknowledges that the
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Co-Administrative Agents have no liability under this Agreement other than thoseassumed by them in their capacities as Lenders.
SECTION 7.02. Administrative Agent's Reliance, Etc. Neither the------------------------------------
Administrative Agent nor any of its directors, officers, agents or employeesshall be liable to any Lender for any action taken or omitted to be taken by itor them under or in connection with this Agreement, except for its or their owngross negligence or willful misconduct. Without limitation of the generality ofthe foregoing, the Administrative Agent: (i) may treat the Lender which madeany Advance as the holder of the Debt resulting therefrom until theAdministrative Agent receives and accepts an Assumption Agreement entered intoby an Assuming Lender as provided in Section 2.19 or 2.20, as the case may be,
or an Assignment and Acceptance entered into by such Lender, as assignor, and anEligible Assignee, as assignee, as provided in Section 8.07; (ii) may consultwith legal counsel (including counsel for the Borrower), independent publicaccountants and other experts selected by it and shall not be liable for anyaction taken or omitted to be taken in good faith by it in accordance with theadvice of such counsel, accountants or experts; (iii) makes no warranty orrepresentation to any Lender and shall not be responsible to any Lender for anystatements, warranties or representations (whether written or oral) made in orin connection with this Agreement; (iv) shall not have any duty to ascertain orto inquire as to the performance or observance of any of the terms, covenants orconditions of this Agreement on the part of the Borrower or to inspect theproperty (including the books and records) of the Borrower; (v) shall not beresponsible to any Lender for the due execution, legality, validity,enforceability, genuineness, sufficiency or value of this Agreement or anyinstrument or document furnished pursuant hereto; and (vi) shall incur noliability under or in respect of this Agreement by acting upon any notice,consent, certificate or other instrument or writing (which may be by telecopier,telegram or telex) believed by it to be genuine and signed or sent by the properparty or parties.
SECTION 7.03. CUSA and Affiliates. With respect to its Commitment and-------------------
the Advances made by it and any Note or Notes issued to it, CUSA shall have thesame rights and powers under this Agreement as any other Lender and may exercisethe same as though it were not the Administrative Agent; and the term "Lender"or "Lenders" shall, unless otherwise expressly indicated, include CUSA in itsindividual capacity. CUSA and its respective Affiliates may accept depositsfrom, lend money to, act as trustee under indentures of, accept investmentbanking engagements from, and generally engage in any kind of business with, theBorrower, any of its subsidiaries and any Person who may do business with or ownsecurities of the Borrower or any such subsidiary, all as if CUSA was not theAdministrative Agent and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it----------------------
has, independently and without reliance upon the Administrative Agent or anyother Lender and based on the financial statements referred to in Section4.01(c)(i) and such other documents and information as it has deemedappropriate, made its own credit analysis and decision to enter into thisAgreement. Each Lender also acknowledges that it will, independently and withoutreliance upon the Administrative Agent or any other Lender and based on suchdocuments and information as it shall deem appropriate at the time, continue tomake its own credit decisions in taking or not taking action under thisAgreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the---------------
Administrative Agent (to the extent not reimbursed by the Borrower), ratablyaccording to the respective principal amounts of Advances then owing to each ofthem (or, if no Advances are at the time outstanding or if any Advances are thenowing to Persons which are not Lenders, ratably according to the respective
amounts of their Commitments), from and against any and all liabilities,obligations, losses, damages, penalties, actions, judgments, suits, costs,expenses or disbursements of any kind or nature whatsoever which may be imposedon, incurred by, or asserted against the Administrative Agent in any wayrelating to or arising out of this Agreement or any action taken or omitted bythe Administrative Agent under this Agreement; provided that no Lender shall beliable for any portion of such liabilities, obligations, losses, damages,penalties, actions, judgments, suits, costs, expenses or disbursements resultingfrom the Administrative Agent's gross negligence or willful misconduct. Withoutlimitation of the foregoing, each Lender agrees to reimburse the AdministrativeAgent promptly upon demand for its ratable share of any out-of-pocket expenses(including reasonable counsel fees) incurred by the Administrative Agent inconnection with the preparation, execution, delivery, administration,modification, amendment or enforcement (whether through negotiations, legal orbankruptcy proceedings or otherwise) of, or legal advice in respect of rights orresponsibilities under, this Agreement, to the extent that the AdministrativeAgent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Administrative Agent. The Administrative Agent------------------------------
may resign at any time by giving written notice thereof to the Lenders and theBorrower and such resignation shall be effective upon the appointment of asuccessor Administrative Agent as provided herein. Upon any such resignation,the Majority Lenders shall have the right to appoint a successor AdministrativeAgent. If no successor Administrative Agent shall have been so appointed by theMajority Lenders, and shall have accepted such appointment, within 30 days afterthe retiring Administrative Agent's giving of notice of resignation, then theretiring Administrative Agent may, on behalf of the Lenders, appoint a successorAdministrative Agent. Any successor Administrative Agent appointed hereundershall be a commercial bank organized or licensed under the laws of the UnitedStates or of any State thereof, or an Affiliate of any such commercial bank,having a combined capital and surplus of at least $500,000,000. Upon theacceptance of any appointment as Administrative Agent hereunder by a successorAdministrative Agent, such successor Administrative Agent shall thereuponsucceed to and become vested with all the rights, powers, discretion, privilegesand duties of the retiring Administrative Agent, and the retiring AdministrativeAgent shall be discharged from its duties and obligations under this Agreement.After any retiring Administrative Agent's resignation hereunder asAdministrative Agent, the provisions of this Article VII shall inure to itsbenefit as to any actions taken or omitted to be taken by it while it wasAdministrative Agent under this Agreement.
ARTICLE VIIIMISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision---------------
of this Agreement, nor consent to any departure by the Borrower therefrom, shallin any event be effective unless the same shall be in writing and signed by theMajority Lenders, and then such waiver or consent shall be effective only in thespecific instance and for the specific purpose for which given; provided,however, that no amendment, waiver or consent shall, unless in writing andsigned by all the Lenders (other than the Borrower or any of its Affiliates, ifa Lender, at the time of any such amendment, waiver or consent), do any of thefollowing: (a) waive any of the conditions specified in Section 3.01 or 3.02,(b) increase the Commitments of the Lenders (other than as provided in Section2.19) or subject the Lenders to any additional obligations, (c) reduce theprincipal of, or interest on, the Advances or the facility fees payablehereunder, (d) postpone any date fixed for any payment of principal of, orinterest
37
on, the Advances (other than as provided in Section 2.20), (e) change thepercentage of the Commitments or of the aggregate unpaid principal amount ofAdvances, or the number of Lenders, which shall be required for the Lenders orany of them to take any action hereunder or (f) amend this Section 8.01; andprovided further that no amendment, waiver or consent shall, unless in writingand signed by the Administrative Agent in addition to the Lenders required aboveto take such action, affect the rights or duties of the Administrative Agentunder this Agreement or any Note.
SECTION 8.02. Notices, Etc. (a) All notices and other communications------------
provided for hereunder shall, except as otherwise expressly provided for herein,be in writing (including telecopier, telegraphic or telex communication) andmailed, telecopied, telegraphed, telexed or delivered, if to the Borrower, atits address at:
The Walt Disney Company500 South Buena Vista StreetBurbank, California 91521Attention: Assistant TreasurerTelecopy Number: (818) 563-1682 and (818) 562-1811
with a copy to:
The Walt Disney Company500 South Buena Vista StreetBurbank, California 91521Attention: Corporate Legal DepartmentTelecopy Number: (818) 563-4160
if to any Initial Lender, at its Domestic Lending Office specified opposite itsname on Schedule I hereto; if to any other Lender, at its Domestic LendingOffice specified in the Assumption Agreement or the Assignment and Acceptancepursuant to which it became a Lender, as the case may be; and if to the
Citicorp USA, Inc.One Court SquareLong Island City, New York 11120Attention: Kim ColeyTelecopy Number: (718) 248-4844
with a copy to:
Citicorp Securities, Inc.One Sansome StreetSan Francisco, California 94104Attention: Mark WilsonTelecopy Number: (415) 627-6355;
or, as to each party, at such other address as shall be designated by such partyin a written notice to the other parties. All such notices and communicationsshall, when mailed, telecopied, telegraphed or
38
telexed, be effective when deposited in the mails, telecopied, delivered to thetelegraph company or confirmed by telex answerback, respectively, except thatnotices and communications to the Administrative Agent pursuant to Article II orVII shall not be effective until received by the Administrative Agent. Deliveryby telecopier of an executed counterpart of any amendment or waiver of anyprovision of this Agreement or of any Exhibit hereto to be executed anddelivered hereunder shall be effective as delivery of a manually executedcounterpart thereof.
(b) If any notice required under this Agreement is permitted to bemade, and is made, by telephone, actions taken or omitted to be taken inreliance thereon by the Administrative Agent or any Lender shall be binding uponthe Borrower notwithstanding any inconsistency between the notice provided bytelephone and any subsequent writing in confirmation thereof provided to theAdministrative Agent or such Lender; provided that any such action taken oromitted to be taken by the Administrative Agent or such Lender shall have beenin good faith and in accordance with the terms of this Agreement.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any-------------------
Lender or the Administrative Agent to exercise, and no delay in exercising, anyright hereunder shall operate as a waiver thereof; nor shall any single orpartial exercise of any such right preclude any other or further exercisethereof or the exercise of any other right. The remedies herein provided arecumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay,------------------
within five Business Days of demand, all actual and reasonable costs andexpenses, if any (including, without limitation, actual and reasonable counselfees and expenses), of the Administrative Agent and each Lender in connectionwith the enforcement (whether through legal proceedings or otherwise) of thisAgreement and the other instruments and documents to be delivered hereunder,including, without limitation, reasonable counsel fees and expenses inconnection with the enforcement of rights under this Section 8.04(a).
(b) If any payment of principal of, or Conversion of, any EurodollarRate Advance is made other than on the last day of the Interest Period for suchAdvance, as a result of a payment or Conversion pursuant to Section 2.08(f) or2.10 or acceleration of the maturity of the Advances pursuant to Section 6.01 orfor any other reason (other than by reason of a payment pursuant to Section2.12), the Borrower shall, within five Business Days of demand by any Lender(with a copy of such demand to the Administrative Agent), pay to such Lender anyamounts required to compensate such Lender for any additional losses, costs orexpenses which it may reasonably incur as a result of such payment orConversion, including, without limitation, any loss, cost or expense incurred byreason of the liquidation or reemployment of deposits or other funds acquired bysuch Lender to fund or maintain such Advance.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the----------------
continuance of any Event of Default and (ii) the making of the request or thegranting of the consent specified by Section 6.01 to authorize theAdministrative Agent to declare the Advances due and payable pursuant to theprovisions of Section 6.01, each Lender (and, in the case of CUSA, Citibank) ishereby authorized at any time and from time to time, to the fullest extentpermitted by law, to set off and apply any and all deposits (general or special,time or demand, provisional or final, but excluding trust accounts) at any timeheld and other indebtedness at any time owing by such Lender (and, in the caseof CUSA, Citibank) to or for the credit or the account of the Borrower againstany and all of the obligations of the Borrower now or hereafter existing underthis Agreement, whether or not such Lender shall have made any demand
39
under this Agreement. Each Lender agrees promptly to notify the Borrower afterany such set-off and application made by such Lender (and, in the case of CUSA,Citibank); provided that the failure to give such notice shall not affect thevalidity of such set-off and application. The rights of each Lender (and, inthe case of CUSA, Citibank) under this Section are in addition to other rightsand remedies (including, without limitation, other rights of set-off) which suchLender may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective--------------
(other than Section 2.01, which shall only become effective upon satisfaction ofthe conditions precedent set forth in Section 3.01) when it shall have beenexecuted by the Borrower, the Administrative Agent and each Co-Administrative
Agent and when the Administrative Agent shall have been notified by each InitialLender that such Initial Lender has executed it and, thereafter, shall bebinding upon and inure to the benefit of the Borrower, the Administrative Agent,each Co-Administrative Agent and each Lender and their respective successors andpermitted assigns, except that the Borrower shall not have the right to assignits rights hereunder or any interest herein without the prior written consent ofthe Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender may and,------------------------------
if requested by the Borrower upon notice by the Borrower delivered to suchLender and the Administrative Agent pursuant to clause (ii) of Section 2.16,will, assign to one or more Eligible Assignees all or a portion of its rightsand obligations under this Agreement (including, without limitation, all or aportion of its Commitment, the Advances owing to it and any Note or Notes heldby it); provided, however, that (i) each such assignment shall be of a constant,and not a varying, percentage of all rights and obligations under thisAgreement, (ii) the sum of (A) the amount of the Commitment of the assigningLender being assigned pursuant to each such assignment and (B) the amount of thecommitment being contemporaneously assigned under the 364-Day Credit Agreementby the Person that is such assigning Lender (in both cases determined as of thedate of the Assignment and Acceptance or similar agreement with respect to suchassignments) shall not be less than $50,000,000 in the aggregate (unless suchlesser amount is previously agreed among such assigning Lender, theAdministrative Agent and the Borrower), provided, however, that if the aggregateamount of the Commitment of such assigning Lender hereunder and its commitmentunder the 364-Day Credit Agreement is less than $50,000,000 on the date of suchproposed assignments, such assigning Lender may assign all, but not less thanall, of its remaining rights and obligations under this Agreement and the 364-Day Credit Agreement (unless an assignment of a portion of such assigningLender's obligations hereunder and thereunder is otherwise previously agreedamong such assigning Lender, the Administrative Agent and the Borrower), (iii)each such assignment shall be to an Eligible Assignee, and (iv) the parties toeach such assignment (other than the Borrower) shall execute and deliver to theAdministrative Agent, for its acceptance and recording in the Register, anAssignment and Acceptance, together with a processing and recordation fee of$3,000. Upon such execution, delivery, acceptance and recording, from and afterthe effective date specified in each Assignment and Acceptance, (x) the assigneethereunder shall be a party hereto and, to the extent that rights andobligations hereunder have been assigned to it pursuant to such Assignment andAcceptance, have the rights and obligations of a Lender hereunder and (y) theLender assignor thereunder shall, to the extent that rights and obligationshereunder have been assigned by it pursuant to such Assignment and Acceptance,relinquish its rights (other than any rights such Lender assignor may have underSections 2.11, 2.14 and 8.08) and be released from its obligations under thisAgreement (and, in the case of an Assignment and Acceptance covering all or theremaining portion of an assigning Lender's rights and obligations under thisAgreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, theLender assignor thereunder and the assignee thereunder confirm to and agree witheach other and the other parties hereto as follows: (i) other than as providedin such Assignment and Acceptance, such assigning Lender makes no representationor warranty and assumes no responsibility with respect to any statements,warranties or representations made in or in connection with this Agreement orthe execution, legality, validity, enforceability, genuineness, sufficiency orvalue of this Agreement or any instrument or document furnished pursuant hereto;(ii) such assigning Lender makes no representation or warranty and assumes noresponsibility with respect to the financial condition of the Borrower or any ofits subsidiaries or the performance or observance by the Borrower of any of itsobligations under this Agreement or any instrument or document furnishedpursuant hereto; (iii) such assignee confirms that it has received a copy ofthis Agreement, together with copies of the financial statements referred to inSection 4.01(c)(i) and such other documents and information as it has deemedappropriate to make its own credit analysis and decision to enter into suchAssignment and Acceptance; (iv) such assignee will, independently and withoutreliance upon the Administrative Agent, such assigning Lender or any otherLender and based on such documents and information as it shall deem appropriateat the time, continue to make its own credit decisions in taking or not takingaction under this Agreement; (v) such assignee confirms that it is an EligibleAssignee; (vi) such assignee appoints and authorizes the Administrative Agent totake such action as agent on its behalf and to exercise such powers under thisAgreement as are delegated to the Administrative Agent by the terms hereof,together with such powers as are reasonably incidental thereto; and (vii) suchassignee agrees that it will perform in accordance with their terms all of theobligations which by the terms of this Agreement are required to be performed byit as a Lender.
(c) The Administrative Agent shall maintain at its address referred toin Section 8.02 a copy of each Assignment and Acceptance and each AssumptionAgreement delivered to and accepted by it and a register for the recordation ofthe names and addresses of the Lenders and the Commitment of, and principalamount of the Advances owing to, each Lender from time to time (the "Register").The entries in the Register shall be conclusive and binding for all purposes,absent manifest error, and the Borrower, the Administrative Agent and theLenders may treat each Person whose name is recorded in the Register as a Lenderhereunder for all purposes of this Agreement. The Register shall be availablefor inspection by the Borrower or any Lender at any reasonable time and fromtime to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by anassigning Lender and an assignee representing that it is an Eligible Assigneeand, if applicable, the Borrower, together with any Note subject to suchassignment, the Administrative Agent shall, if such Assignment and Acceptancehas been completed and is in substantially the form of Exhibit B hereto, (i)accept such Assignment and Acceptance, (ii) record the information containedtherein in the Register and (iii) give prompt notice thereof to the Borrower.
(e) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under thisAgreement (including, without limitation, all or a portion of its Commitment andthe Advances owing to it); provided, however, that (i) such Lender's obligationsunder this Agreement (including, without limitation, its Commitment hereunder)shall remain unchanged, (ii) such Lender shall remain solely responsible to theother parties hereto for the performance of such obligations, (iii) theBorrower, the Administrative Agent and the other Lenders shall continue to dealsolely and directly with such Lender in connection with such Lender's rights andobligations under this Agreement, and (iv) such Lender shall not agree in anyparticipation agreement with any participant
41
or proposed participant to obtain the consent of such participant beforeagreeing to the amendment, modification or waiver of any of the terms of thisAgreement or any Note, before consenting to any action or failure to act by theBorrower or any other party hereunder or under any Note, or before exercisingany rights it may have in respect thereof, unless such amendment, modification,waiver, consent or exercise would (A) increase the amount of such participant'sportion of such Lender's Commitment, (B) reduce the principal amount of or rateof interest on the Advances or any fee or other amounts payable hereunder towhich such participant would be entitled to receive a share under suchparticipation agreement, or (C) postpone any date fixed for any payment ofprincipal of or interest on the Advances or any fee or other amounts payablehereunder to which such participant would be entitled to receive a share undersuch participation agreement.
(f) Any Lender may, in connection with any assignment or participation orproposed assignment or participation pursuant to this Section 8.07, disclose tothe assignee or participant or proposed assignee or participant any informationrelating to the Borrower furnished to such Lender by or on behalf of theBorrower in writing and directly related to the transactions contemplatedhereunder; provided that, prior to any such disclosure, the assignee orparticipant or proposed assignee or participant shall agree to preserve theconfidentiality of any confidential information relating to the Borrowerreceived by it from such Lender in accordance with the terms of Section 8.09.
(g) No participation or assignment hereunder shall be made in violation ofthe Securities Act of 1933, as amended from time to time, or any applicablestate securities laws, and each Lender hereby represents that it will make anyAdvance for its own account in the ordinary course of its business and not witha view to the public distribution or sale thereof.
(h) Anything in this Agreement to the contrary notwithstanding, any Lendermay at any time create a security interest in all or any portion of its rightsunder this Agreement (including, without limitation, the Advances owing to itand any Note issued to it hereunder) in favor of any Federal Reserve Bank inaccordance with Regulation A of the Board of Governors of the Federal ReserveSystem (or any successor regulation thereto) and the applicable operatingcircular of such Federal Reserve Bank.
SECTION 8.08. Indemnification. The Borrower agrees to indemnify and hold---------------
harmless the Administrative Agent, each Co-Administrative Agent and each Lenderand each of their Affiliates and their respective officers, directors,employees, agents and advisors (each an "Indemnified Party") from and againstany and all claims, damages, losses, liabilities and expenses (including,without limitation, reasonable fees and expenses of counsel) that may beincurred by or asserted against any Indemnified Party, in each case arising outof or in connection with or by reason of, or in connection with the preparationfor a defense of, any investigation, litigation or proceeding (whether or not anIndemnified Party is a party thereto) arising out of, related to or inconnection with the Commitments hereunder or the Advances made pursuant heretoor any transactions done in connection herewith, including, without limitation,any transaction in which any proceeds of the Advances are, or are proposed, tobe applied (collectively, the "Indemnified Matters"); provided that the Borrowershall have no obligation to any Indemnified Party under this Section 8.08 withrespect to (i) matters for which such Indemnified Party has been reimbursed byor on behalf of the Borrower pursuant to any other provision of this Agreement,but only to the extent of such reimbursement, or (ii) Indemnified Matters foundby a court of competent jurisdiction to have resulted from the willfulmisconduct or gross negligence of such Indemnified Party. If any action isbrought against any Indemnified Party, such Indemnified Party shall promptlynotify the
42
Borrower in writing of the institution of such action and the Borrower shallthereupon have the right, at its option, to elect to assume the defense of suchaction; provided, however, that the Borrower shall not, in assuming the defenseof any Indemnified Party in any Indemnified Matter, agree to any dismissal orsettlement of such Indemnified Matter without the prior written consent of suchIndemnified Party, which consent shall not be unreasonably withheld, if suchdismissal or settlement (A) would require any admission or acknowledgement ofculpability or wrongdoing by such Indemnified Party or (B) would provide for anynonmonetary relief to any Person to be performed by such Indemnified Party. Ifthe Borrower so elects, it shall promptly assume the defense of such action,including the employment of counsel (reasonably satisfactory to such IndemnifiedParty) and payment of expenses. Such Indemnified Party shall have the right toemploy its or their own counsel in any such case, but the fees and expenses ofsuch counsel shall be at the expense of such Indemnified Party unless (1) theemployment of such counsel shall have been authorized in writing by the Borrowerin connection with the defense of such action or (2) the Borrower shall not haveproperly employed counsel reasonably satisfactory to such Indemnified Party tohave charge of the defense of such action, in which case such fees and expensesshall be paid by the Borrower. If an Indemnified Party shall have reasonablyconcluded (based upon the advice of counsel) that the representation by onecounsel of such Indemnified Party and the Borrower creates a conflict ofinterest for such counsel, the reasonable fees and expenses of such counselshall be borne by the Borrower and the Borrower shall not have the right to
direct the defense of such action on behalf of such Indemnified Party (but shallretain the right to direct the defense of such action on behalf of theBorrower). Anything in this Section 8.08 to the contrary notwithstanding, theBorrower shall not be liable for the fees and expenses of more than one counselfor any Indemnified Party in any jurisdiction as to any Indemnified Matter or,except as specified in the second sentence of this Section 8.08, for anysettlement of any Indemnified Matter effected without its written consent. Allobligations of the Borrower under this Section 8.08 shall survive the making andrepayment of the Advances and the termination of this Agreement.
SECTION 8.09. Confidentiality. Subject to the provisions of Section---------------
8.07(f), each Lender shall, and shall instruct its Affiliates, successors,assigns, advisors, officers, employees, directors, agents, legal counsel andother professional advisors (the "Informed Parties") to, hold all nonpublicinformation obtained pursuant to this Agreement in accordance with its customaryprocedures for handling confidential information of this nature and inaccordance with safe and sound banking practices and in any event may makedisclosure reasonably required by a bona fide transferee or participant inconnection with the contemplated transfer or participation or to another Lenderor an Informed Party agreeing to hold such nonpublic information as confidentialor as required or requested by law or to any governmental authority orrepresentative thereof or pursuant to legal process; provided that unlessspecifically prohibited by applicable law or court order, each Lender shallnotify the Borrower of any request by any governmental authority orrepresentative thereof (other than any such request in connection with anexamination of the financial condition of such Lender by such governmentalauthority) for disclosure of any such nonpublic information prior to disclosureof such information; and provided further that in no event shall any Lender beobligated or required to return any materials furnished by the Borrower.
SECTION 8.10. Consent to Jurisdiction and Service of Process. All----------------------------------------------
judicial proceedings brought against the Borrower with respect to this Agreementor any instrument or other documents delivered hereunder may be brought in anystate or federal court in the Borough of Manhattan in the State of New York, andby execution and delivery of this Agreement, the Borrower accepts, for itselfand in connection with its properties, generally and unconditionally, thenonexclusive jurisdiction of the aforesaid
43
courts, and irrevocably agrees to be bound by any final judgment renderedthereby in connection with this Agreement or any instrument or other documentdelivered hereunder from which no appeal has been taken or is available. TheBorrower agrees to receive service of process in any such proceeding in any suchcourt at its office at 114 Fifth Avenue, New York, New York 10011, Attention:Kenneth E. Newman (or at such other address in the Borough of Manhattan in theState of New York as the Borrower shall notify the Administrative Agent fromtime to time) and, if the Borrower ever ceases to maintain such office in the
Borough of Manhattan, irrevocably designates and appoints CT Corporation System,1633 Broadway, New York, New York 10019, or any other address in the State ofNew York communicated by CT Corporation System to the Administrative Agent, asits agent to receive on its behalf service of all process in any such proceedingin any such court, such service being hereby acknowledged by the Borrower to beeffective and binding service in every respect.
SECTION 8.11. Governing Law. This Agreement shall be governed by, and-------------
construed in accordance with, the laws of the State of New York.
SECTION 8.12. Execution in Counterparts. This Agreement may be executed-------------------------
in any number of counterparts and by different parties hereto in separatecounterparts, each of which when so executed shall be deemed to be an originaland all of which taken together shall constitute one and the same agreement.Delivery of an executed counterpart of a signature page to this Agreement bytelecopier shall be effective as delivery of a manually executed counterpart ofthis Agreement. A full set of executed counterparts of this Agreement shall belodged with the Administrative Agent and the Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to beexecuted by their respective officers thereunto duly authorized, as of the datefirst above written.
<ARTICLE> 5<LEGEND>THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSEDCONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT OF INCOME FOUNDON THE COMPANY'S FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996 AND ISQUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.</LEGEND><MULTIPLIER> 1,000,000
